Many calls at $65,000, $70,000 and $75,000 crossed the tape on dominant crypto options exchange Deribit over the weekend.
The concentration of activity in these so-called out-of-the-money calls reflects bullish market sentiment.
Move over fears of a bitcoin {{BTC}} price drop due to so-called overbought technical conditions and potential selling by bankrupt crypto lender Genesis.
Crypto traders are snapping cheap out-of-the-money (OTM) bitcoin calls or bullish options bets at levels around the cryptocurrency’s lifetime high of $69,000.
Over the weekend, many call options at strikes $65,000, $70,000 and $75,000 changed hands on Deribit, the world’s leading crypto options exchange by volumes and open interest. On Deribit, one options contract represents one BTC.
Call options give investors the right to buy the underlying asset at a specific price by a stated date, while puts confer the right to sell. A call buyer is implicitly bullish on the market.
The mass buying of higher strike calls reflects a bullish mood among sophisticated market participants.
“We see a concentration of open interest in $50k calls and have seen flows in $50K, $60K and $75K calls in the listed options markets from April to June maturities”" Kelly Greer, Head of Americas Sales, Galaxy, told CoinDesk in an interview. “These flows demonstrate conviction from buyers willing to pay a premium to take on these positions, suggesting investors have a constructive view on bitcoin.”
Greer added that a similar concentration of activity in the OTM calls at $30,000 and $40,000 in the final quarter of 2023 paved the way for a convincing price rally through those levels.
Positioning in the options market has been a reliable indicator of impending price swings.
The recent bullish flows are reminiscent of the 2020-2021 bull market when sophisticated market participants consistently bought calls at strikes at $80,000 and higher at cheap valuations.
Bitcoin has nearly doubled to $50,000 since early October, with prices rising from $38,500 in the past three weeks, mainly due to strong ETF inflows.
The cryptocurrency’s 14-day relative strength index, a popular technical analysis tool, has jumped above 70, signaling overbought conditions in the bitcoin market. An overbought reading is often taken as a signal of an impending bearish trend reversal, although it only means the market has rallied a little too fast in a short period and may take a breather.“
"Bitcoin posted its seventh consecutive day of gains, but the strengthening slowed over the weekend. It also coincided with a move above 70 on the RSI on the daily timeframes, which could increase players’ appetite for short-term profit-taking. Caution is also building as we approach the January peak,” Alex Kuptsikevich, senior analyst at FxPro, said in an email Monday.
Besides, a looming concern is that failed crypto lender Genesis’ forced sale of $1.6 billion in bitcoin, ether and ethereum classics could drive prices lower. Genesis recently filed a motion asking a U.S. judge to approve the sale of the above-mentioned cryptocurrencies held in Grayscale’s trust products.
