- Bitcoin options market is recovering from the spreading FTX contagion and Genesis Global’s bankruptcy with a spike in open interest.
- Open interest in Bitcoin has hit $5.92 billion alongside BTC price’s rally to $23,000, its highest since October 27.
- The share of calls relative to put volume is at 66% implying a bullish sentiment among institutions and individuals that trade Bitcoin options.
The total volume of Bitcoin options on Deribit hit its highest level since the FTX exchange collapse. Deribit is one of the world’s largest cryptocurrency options exchanges, therefore the spike in options volume signals a bullish shift in investor sentiment.
Bitcoin options traders are bullish on a massive rally in BTC, with call volume exceeding puts.
Also read: This is the real reason Elon Musk’s Tesla did not sell Bitcoin in Q4 2022
Bitcoin price rally pushes BTC to $23,000 alongside uptick in options volume
Bitcoin price wiped out its losses from Samuel Bankman-Fried’s (SBF) FTX exchange collapse and made a comeback above the $23,000 level in January 2023. BTC has consistently yielded gains for holders in the first three weeks of the year. Despite a spike in profit taking by short-term BTC holders, the asset has held its ground above $23,000.
From the recent data on options, it is evident that the market is recovering from the spreading FTX contagion and crypto lender Genesis Global’s bankruptcy. The total volume of Bitcoin options on Deribit climbed to $4.25 billion in the week that ended on January 20.
This is the highest volume of options traded since the collapse of SBF’s FTX exchange. Data on options activity on Deribit exchange is a reliable indicator of the sentiment among options traders since the platform accounts for 90% of the global trade volume and open interest.
Crypto options intelligence platform Amberdata revealed that the spike in BTC options trade volume last week was a 375% increase from the $895 million low registered in the last week of 2022. It is important to note that this marks a shift in sentiment among Bitcoin options traders that represent both institutional traders and private investors.
Influx of capital in Bitcoin options confirms the BTC uptrend
Options and derivatives contracts offer the purchaser a right but not obligation to buy/sell Bitcoin at a predetermined price on or before a specific date. Call options give the right to buy and are a bullish bet while put options give the right to sell and constitute a bearish bet.
Analysts at Kaiko Research recently shared a note with their clients commenting on the share of calls relative to puts.
The share of calls relative to put volume is currently at more than 66%, its highest level in over a year. This is yet another indicator that sentiment has improved in January.
Deribit BTC options activity
As seen in the chart above, data from Amberdata.io signals a dominance of calls bought and sold over puts bought and sold in the last 30 days. The impressive recovery in trade volume of Bitcoin options and calls dominance is driven by bullish bets made by options traders.
Experts at Kaiko believe that an uptick in open interest alongside Bitcoin’s price rally suggests an influx of capital on the bullish side and this is a confirmation of the asset’s uptrend.
Bitcoin price gears up for massive rally to $28,000
Bitcoin price is currently changing hands at just above the $23,000 level. It has arguably reversed its bear market trend, at least in the short-term, after breaking above the November 5 highs at $21,473 (the last lower high of the prior bear market) and doing so on high volume and very strong momentum. This favors bullish traders. Furthermore it has broken above the 50, 100 and 200-day Moving Averages.
As seen on the BTC/USDT 1D price chart below, Bitcoin has printed two consecutive bull flag patterns in January. The last bull flag formed after it began its rally on January 19. The 19th, 20th and 21st were all up-days and may constitute the ‘pole’ of this flag. Since then it has been trading sideways. If there is a breakout from the current consolidation pattern, the flag will likely run up by the height of the pole extrapolated the same distance higher, which in this case would forecast a move up to about $26,005; or, for a more conservative target, the 61.8% fibonacci extension of the pole to roughly $25,000.
Despite the bullish outlook suggested by the flag pattern, traders should be aware of tough resistance coming in at $24,740 and $25,625 from major moving averages on higher time frames. These are likely to impede upwards progress and may cause pullbacks or even reversals.
BTC/USDT 1D price chart
The Relative Strength Index, a momentum indicator has been in the overbought territory since January 11. This signals price may be overbought in the short-term and for bulls not to add any further longs to their positions.
A decline to the trendline for the January rally, and the 200-day EMA could signal a correction in Bitcoin’s price. A close below the trendline and consecutive drop to the 50-day EMA could invalidate the bullish thesis. A break below the key $21,000 low would mark the end of the short-term uptrend in BTC.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
US presidential election outcome could shape the future of crypto
US citizens will go to the polls to elect a new president on November 5, and their choice could be key for the future of the crypto industry and thus the price outlook for Bitcoin (BTC).
Bitcoin ETFs beat Gold ETFs with 65% gain since launch
Bitcoin ETFs have reshaped the digital asset investment landscape since their approval in January. Their total assets under management climbed over $70 billion during the weekend, placing them ahead of other investment products, including gold.
XRP eyes 10% rally amid relisting across crypto exchanges and growing institutional demand
Ripple's XRP is trading at $0.5050 up slightly by 0.2% in the past 24 hours as it struggles to sustain a move above a key symmetry triangle resistance. Meanwhile, in its recently released Q3 report, Ripple noted the rising listing and relisting of XRP across crypto exchanges and global platforms.
Ethereum Price Forecast: ETH struggles below $2,500 amid State of Michigan pension fund investment in ETH ETF
Ethereum is trading near $2,420, down about 1% on Monday, but could bounce off a key descending trendline close to the $2,258 historically high demand zone. Meanwhile, the State of Michigan pension fund revealed an investment of $11 million in ETH exchange-traded funds.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.