A cryptocurrency trading platform cited recent options activity data, stating that investors in the world's largest cryptocurrency expect Bitcoin prices to drop significantly, after Bitcoin failed to reach the historical high of $100,000.
Bitcoin reached an all-time high of $99,830 on November 22, but has since fallen over 8%, dropping to $91,377.32 on Tuesday, hitting a new low for the week.
So far this year, this most famous cryptocurrency has soared 120%, rising about 34% this month, which is linked to Trump’s election as President of the United States and a surge of pro-cryptocurrency lawmakers in Congress. Trump supported digital assets in his campaign, promising to make the U.S. the 'global cryptocurrency capital' and accumulate national Bitcoin reserves.
Nick Forster, founder of the decentralized options protocol Derive with a total trading volume of $7.1 billion, commented via email on Tuesday that the so-called bullish-bearish skew index for Bitcoin options expiring on December 27 has dropped significantly by 30% in the past 24 hours as market participants shifted to more protective strategies.
Bullish-Bearish skew reflects market sentiment, indicating the difference in implied volatility between call options and put options. Although it has declined, this index still shows that there are more bullish options than bearish options in the market.
Forster stated, "This indicates that traders are beginning to hedge against potential downside risks, which may be a response to a significant drop in Bitcoin. However, such pullbacks are not uncommon in a bull market."
Investors are focusing on December 27, when $11.8 billion worth of Bitcoin options will expire, which could trigger significant price fluctuations in either direction.
According to Forster, the probability of Bitcoin falling 16.03% to $81,493 or rising 19.9% to $115,579 by December 27 is 68%. However, the probability of Bitcoin experiencing larger fluctuations (falling 29.49% to $68,429 or rising 41.83% to $137,645) is lower, around 5%.
Data from Derive also shows that the probability of Bitcoin reaching $100,000 has risen from 34% last week to 45%, while the probability of exceeding $150,000 is 4%.
Forster also noted that Bitcoin's volatility has remained stable over the past seven days, with an implied volatility of 63% for the next seven days and 55% for 30 days, "This close consistency indicates that the market expects significant volatility to occur soon."
Bitcoin has currently retreated from its highs, and one of the reasons cited by market participants for the price drop is profit-taking.
Anthony Pompliano, founder and CEO of Professional Capital Management, noted in a letter to clients on Tuesday that long-term holders have sold $60 billion worth of Bitcoin in the past 30 days.
Since the FTX collapse two years ago, which led Bitcoin to a low of $15,479, 21% of the Bitcoin sold by long-term holders occurred in November, reportedly marking the most severe profit-taking of this cycle to date.
Article forwarded from: Jin Ten Data
