- According to an analyst, traders of bitcoin options are paying high premiums for call options, which suggests that they are becoming increasingly optimistic about potential price increases.
- As bitcoin’s spot prices move into fresh price discovery, traders view the post-election easing in implied volatility as a chance to purchase “cheap” optionality, the analyst continued.
According to an analyst, traders of bitcoin options are paying high premiums for call options, which suggests that they are becoming increasingly optimistic about the future price increases of the digital currency.
Bitcoin options currently have a 1-month 25-delta skew that favors calls by about 3.3 points, and traders are paying higher premiums for these positions. According to Jake Ostrovskis, an OTC trader at Wintermute, this skew indicates that derivatives traders are getting ready for possible bitcoin price spikes.
This call premium is a blatant indication of market optimism.
Ostrovskis emphasized the possibility of more gains, pointing out that although this skew is noteworthy, it is still below levels observed in early 2024, when it hit almost 7 points. Given that this number is historically in the 62nd percentile, there may be more positive developments ahead.
Following Trump’s victory in the US election, implied volatility has decreased
After peaking before the U.S. election, implied volatility for bitcoin options has now decreased to a more neutral level as election-related hedging has decreased.
As bitcoin’s spot price moves into a new stage of price discovery, some traders view the 30-day at-the-money implied volatility, which is now in the 30th percentile, as a chance to purchase “cheap” optionality.
Analysts at Bitwise Europe claim that open interest in bitcoin options has increased recently, hitting levels last observed in March 2024. The Bitwise analysts pointed out that there was a call bias and that, on an annualized basis, the 1-month 25-delta skew was almost 6% in favor of calls, highlighting traders’ optimistic view.
Even while 1-month realized volatility has increased, Bitcoin option implied volatilities have shifted much down. This is probably because short-dated options have been unwound as U.S. election hedging activity has decreased.
After Trump’s presidential victory, sentiment in the broader cryptocurrency market increases
Since the U.S. election, sentiment has improved in the larger cryptocurrency market, as evidenced by bitcoin’s recent 24-hour surge to over $85,000. Bradley Duke, Head of Europe at Bitwise, claims that investor mood is at its greatest level in three years and that many people view Trump’s victory as a positive development for the cryptocurrency market.
Changes at the SEC, including the possible replacement of Gary Gensler, are highly anticipated and might foster a more hospitable regulatory climate for cryptocurrency.
After Senator Cynthia Lummis, R-Wyo., suggested buying 200,000 bitcoin every year for the next five years, there have also been rumors of a strategic bitcoin reserve in the United States. Adopting such a reserve would make the US government a significant bitcoin owner and would encourage other nations to follow suit. These events, together with broader patterns that support the idea that bitcoin is scarce, have increased market optimism.
According to Bitwise’s CIO Matt Hougan, robust institutional engagement and a positive macroeconomic climate could propel bitcoin to $100,000 by the end of the year and possibly close to $200,000 by the end of 2025.
