Bitcoin (BTC) is back in range after a failed attempt to regain previously lost ground, with a chance of further losses. The crypto market has seen weak price action in 2023, but BTC has been remarkably more vulnerable than other digital assets.
At the time of writing, Bitcoin is trading at USD 16,800 with sideways movement in the past 24 hours. BTC is up 1% in the past seven days. During the same period, Ethereum (ETH), Cardano (ADA), Litecoin (LTC) and others have posted gains north of 6% and 12%.
Bitcoin Investors Hedging Their Positions?
As price stagnates in the Bitcoin spot market, the derivatives industry may provide more clues about price expectations. According to a recent report from crypto exchange Deribit, expectations of a spike in volatility due to the new year fell.
The report claims that market participants have been “reluctant” to jump into the current price action due to uncertainty over macroeconomic conditions. Moreover, the crisis between Gemini and the Digital Currency Group (DCG) has fueled this sentiment.
The DCG owns cryptocurrency lender Genesis, which owes Gemini Earn clients billions of dollars. If the first of these companies decides to liquidate one of their products to pay off their debt, the price of Bitcoin and other cryptocurrencies is likely to go down. Deribit noted:
The options market is rejecting any material directional response to the Gemini-DCG deadline, and the relatively flat skew across the terms does not indicate strong bias.
Implied volatility, a measure of the market’s expectation of price movements, has declined. The options sector has sold off in the current environment; the report notes some buying action around put (bearish) contracts for February and March.
These contracts can be part of a hedging strategy of prominent players with Bitcoin spot positions. If the situation around DCG and Gemini is resolved favorably, the market is likely to move higher.
Additional data from Deribit reflects the current state of the market, which is dominated by no clear direction. As can be seen in the chart below, there is a lot of Open Interest, mostly call options, around $17,000.
This data suggests that market participants are expecting sideways price action starting on the Jan. 27 expiration date. As mentioned, the DCG/Gemini situation and macroeconomic developments may shift this situation.