Cryptocurrency analytics firm Blofin Academy has published an assessment of Bitcoin’s recent rally. The firm attributes the rise to rising investor sentiment and market makers’ relatively supportive actions. However, the firm also notes the risks of future market volatility due to macroeconomic uncertainties and derivatives traders’ positions.
Post-Holiday Surge and Investor Confidence
On the first trading day after the New Year holiday, both the US stock and crypto markets saw a significant recovery. Despite the high levels of the dollar index (DXY) and US Treasury yields, assets such as Bitcoin (BTC) and the S&P 500 ETF (SPY) showed strong gains, reflecting increased investor confidence. The easing of post-holiday risk aversion played a critical role in this recovery. For SPY, hedging strategies driven by a positive gamma peak supported a steady recovery.
Bitcoin and S&P 500 Show Different Dynamics
According to Blofin Academy, Bitcoin’s market dynamics differ from SPY. After the last trading hour, which was called the “cryptocurrency witching day,” market makers’ positive gamma inventory decreased significantly, but negative gamma inventory remained largely intact. This led market makers to implement a “buy the top, sell the bottom” strategy in Bitcoin. On the other hand, since SPY was sold higher and bought lower, Bitcoin’s volatility (IV) remained high, while SPY’s volatility decreased to more moderate levels.
Investor Optimism and Options Purchases
Investor optimism continues to be the main driver of Bitcoin’s price rally. Increased call option buying has shifted the market skew to the upside. However, Blofin Academy notes that this bullish trend is mostly based on near-term options, which could limit the sustainability of price momentum in the long term.
Volatility Expected in the $100,000 Period
For Bitcoin, block traders are expected to see a period of price volatility around the $100,000 level. Many traders are trading near this level, predicting short-term pullbacks. However, despite these fluctuations, investors remain bullish on Bitcoin’s overall outlook, and sentiment remains positive in the medium to long term.