Bitcoin remains range-bound, hovering around its annual lows, with some bullish momentum on lower time frames. The cryptocurrency suffered from the FTX collapse and subsequent transition, but market participants seem more optimistic about potential gains.
At the time of writing, bitcoin is back to yesterday’s highs. BTC price is trading at USD 16,500 and moving sideways across the board. Other cryptocurrencies in the top 10 by market capitalization showed similar price action. XRP remains the best performing asset in the ranking.
Bitcoin Sentiment Is Improving in the Derivatives Sector
Data from options platform Deribit it shows A change in emotion affects this area. The uncertainty surrounding the collapse of FTX and other crypto companies such as Digital Currency Group (DCG) and cryptocurrency lender Genesis kept the market on its toes.
The latter company halted withdrawal requests from its customers and is seeking emergency capital to resume operations. According to rumors that circulated last week, DCG, the parent company of Genesis, could be affected.
The company denied the speculation and affirmed its long-term intentions to stay in the industry. As a result, the crypto market boomed with the improvement in investor confidence. In addition, the US Federal Reserve hints at a possible pivot.
These two elements support the bullish momentum. Deribit noted that bulls took advantage of last week’s price drop to collect calls (buy orders) on the cheap.
Bullish investors are taking calls in December with strikes above $17,000, $18,000 and $19,000. In other words, the options market is betting that bitcoin will rise higher through the end of the year.
Deribit noted the following about Implied Volatility (IV), a measure influenced by recent events. The measure returns to normal, indicating that the market will eventually absorb any risk from FTX: however, options with a shorter expiration date (December 2) may decrease in value due to the low trading volume over the weekend.
(…) The relief of the news flow allowed contained volumes to return to a more normal contango term structure of a high-voltage backwardation a few days ago.
A Christmas miracle?
In the past 24 hours, the options trading site noted, bearish investors have closed some of their sell (put) contracts. These investors are betting that bitcoin will break below $10,000. There is still some bearish activity aimed at the end of 2022.
However, these investors can hedge long spot positions and protect themselves against possible contingencies. The current state of the crypto market and the possibility of further transitions make this strategy beneficial for long-term investors.
Additional data from Deribit indicates that the total Open Interest (OI) of this sector is approximately $5 billion. Much of this statistic seems counterintuitive.
Before the December 30 expiration date, bullish investors are betting more than $30,000 on bitcoin. The maximum pain scenario, where most options expire worthless, stands at 20,000.