Why Bitcoin’s market right now is more bullish than otherwise
Bitcoin has maintained itself well above $47.5k since 20 August. As its price broke above the critical $48k barrier, many from the community saw the path beyond $50k clearly. Since the king coin still has a few resistance levels to break before it can oscillate above $50k, the spot market is somewhat cautious of its moves.
However, the Options market has some interesting cards laid out, each of which might dictate Bitcoin’s short-term action.
A three-month high means this
With BTC facing resistance at $49k, trade volumes in the spot market showed no major spikes. However, the Options volume peaked on 20 August – An almost 40% jump. Furthermore, it is also noteworthy that Open Interest (OI) for Bitcoin Options hit their three-month high of $7.5 billion on 21 August, a week prior to the next big Options expiry on 27 August.
This means that in less than a week’s time, 40.2k Bitcoins will go through a contract expiry. Options are derivative contracts that give the holder the right but not an obligation to buy or sell an underlying asset at a predetermined price. This is also known as the “strike price.”
OI trends usually highlight spikes just before the date of expiry or sometime prior to them and have been incremental after each expiry.
The same pointed to a hike in liquidity in the Options market and a greater number of investors participating. As can be observed from the chart above, a sustained rise in Options OI alongside BTC’s rise is indicative of the continuation of this trend. Notably, Open Interest was the highest in three months on 21 August.
How bullish REALLY is Bitcoin?
The Call-to-Put Ratio, at the time of writing, stood at 2.01 and tipped in favor of bullish call options. Data reflected the 115,843 BTC call options stacked against the 57,742 put options. Clearly, calls dominated puts by almost 50%.
Thus, while bears anticipate BTC’s price to go below $44,000, bulls need a strong push above $50,000 to stay in the game. However, the expiry of contracts on 27 August could push Bitcoin’s volumes, inducing more market momentum. This will be of key importance in maintaining the rally.
For now, it seems like the market is more bullish on Bitcoin than it has been in the last couple of months.
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Varuni Trivedi, @KhareemSudlow