Bitcoin continues to smash records, recently reaching a new all-time high (ATH) of $107,000. However, a surprising trend in the options market suggests that traders are no longer chasing these price peaks with the same enthusiasm. This shift indicates a more cautious approach among investors, even as the cryptocurrency market remains bullish.
Bitcoin’s Rally Loses Its Spark for Traders
While BTC surged past its previous peak of $105,000 set on December 5th, the current rally has not been met with the typical frenzy. Following a sharp rise of over 50% post-U.S. elections, Bitcoin has shown strong momentum, fueled by comments from President-elect Donald Trump regarding a potential Bitcoin strategic reserve akin to the nation’s oil reserves.
Analysts predict the rally could continue into next year, with projections suggesting Bitcoin could hit $150,000 to $200,000 by the end of 2025. However, the options market tells a different story. Data from Deribit highlights a significant shift in sentiment, with traders adopting a more reserved stance.
Options Market Signals Caution
As of writing, options expiring this Friday reflect a notable change. The 25-delta risk reversal is negative, signaling stronger demand for protective put options over call options. This trend suggests that traders are hedging against potential price declines rather than aggressively pursuing short-term gains.
Furthermore, puts expiring on December 27th are trading at a slight premium compared to calls. Interestingly, options data extending to March shows a marginal call bias of less than three volatility points. These figures stand in contrast to the more aggressive positioning observed just weeks ago.
Traders Await FED Decisions
According to market analyst Omkar Godbole, the current caution contrasts sharply with recent weeks when short-term call options displayed a strong bullish bias. Large trades observed on Deribit also reflect a bearish undertone. For instance, significant short positions have been opened on $108,000 call options expiring on December 27th, while long positions dominate $100,000 puts expiring both on December 27th and January 3rd.
Godbole highlights that this tentative mood hinges on the Federal Reserve’s announcements expected this Wednesday. Investors are closely watching the FED’s outlook for 2025 and its stance on interest rates. A hawkish position, such as slower or smaller rate cuts, could strengthen the U.S. dollar and weigh on risk assets like Bitcoin.
Conclusion
While Bitcoin’s recent price surge is impressive, traders are clearly exercising caution. The shift in sentiment within the options market reflects uncertainty over macroeconomic policies and short-term price movements. All eyes now turn to the FED as investors brace for its next move.
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