Bitcoin’s options market shows bullish bias despite recent sell-off

Bitcoin’s recent market performance has been a wild ride, with prices dropping yet again. However, the options market is signaling something different. Despite the downturn, there’s a bullish bias suggesting that investors are still hopeful for a rally by the end of the year. This sentiment is proven by the huge buying interest in long-term […]

CryptoFortress

Jul 3, 2024 - 15:02

Bitcoin’s options market shows bullish bias despite recent sell-off

Bitcoin’s recent market performance has been a wild ride, with prices dropping yet again. However, the options market is signaling something different.

Despite the downturn, there’s a bullish bias suggesting that investors are still hopeful for a rally by the end of the year. This sentiment is proven by the huge buying interest in long-term options, particularly at the $100k and $120k strike prices.

While the US equity market has soared to new highs, driven by Federal Reserve Chairman Jerome Powell’s comments about the US economy’s progress towards disinflation, this bullish momentum hasn’t spilled over into the cryptocurrency market.

Bitcoin and Ethereum prices remain relatively stagnant, hovering just above $60,000 and $3,300 respectively. Despite the sell-off, QCP Capital believes the options market for Bitcoin is heavily skewed in favor of an upward trend.

Looking ahead to the third quarter, a subdued performance is anticipated for Bitcoin. The market is particularly anxious about the potential impact of the Mt. Gox release.

For those unfamiliar, the Mt. Gox event refers to the release of a large amount of Bitcoin that was recovered from the infamous Mt. Gox hack. The distribution of these Bitcoins could flood the market, increasing supply and potentially depressing prices.

Many traders are choosing to generate yield on their Bitcoin holdings while waiting for the situation to resolve.

One strategy is generating a 15% annual yield on Bitcoin, with the specifics of the trade being tied to the performance of Bitcoin’s price relative to certain benchmarks.

QCP’s trade idea involves a maturity date of September 27, 2024, with a weekly coupon rate of 15% per annum if Bitcoin fixes above 58,000 USD. The strike price is set at 70,000 USD, with a protection level at 80,000 USD.

If the spot price exceeds 80,000 USD at expiry, Bitcoin will be converted to USD at the 70,000 USD strike price. This strategy offers a way to earn a huge yield on Bitcoin while hedging against potential price drops.

Technical indicators point to a bearish momentum

Bitcoin’s 50-period MA is below the 200-period MA, indicating a bearish crossover. This typically translates to a bearish trend continuation.

The MACD line crossing below the signal line and the expanding negative histogram bars indicate the strengthening of the bears. The increasing gap between the two lines suggests a selling pressure will occur in the near term.

The RSI is in the oversold territory (below 30), indicating that the asset is currently undervalued and could be due for a short-term bounce.

Given the strong bearish signals from the moving averages and MACD, the price could continue to fall. Key support levels to watch would be around the $60,000 psychological level and below that, the recent low of $60,283.

Due to the oversold condition indicated by the RSI, there might be a short-term bounce towards the 50 MA ($61,579). If the price reaches this level, it might face resistance and potentially resume the downtrend.

Jai Hamid