Bitcoin remains range-bound, hovering around its annual lows, with brief bullish momentum. The cryptocurrency suffered from the FTX collapse and subsequent contagion, but market participants seem more optimistic about potential gains.
At the time of writing, Bitcoin has bounced back to yesterday’s highs. The price of BTC is trading at USD 16,500 with sideways movement across the board. Other cryptocurrencies in the top 10 by market capitalization are showing similar price action. XRP remains the best performing asset in the ranking.
Bitcoin Sentiment Is Improving in the Derivatives Sector
Data from the Deribit Options Platform indicates that the shift in sentiment has an impact on this sector. The collapse of FTX and the uncertainty surrounding other crypto companies, such as Digital Currency Group (DCG) and cryptocurrency lender Genesis, kept the market on its toes.
The latter company halted withdrawal requests from its customers and is seeking emergency capital to resume operations. According to rumors that circulated last week, Genesis’ parent company DCG could be affected.
The company denied the speculation and reaffirmed its long-term intentions to stay in the industry. As a result, the crypto market rebounded as investor confidence improved. In addition, the US Federal Reserve hints at a possible pivot.
These two elements support the bullish momentum. Deribit noted that bulls took advantage of last week’s downward price action to collect cheap Calls (buy orders).
Optimistic investors are buying calls with strike prices above $17,000, $18,000 and $19,000 through December. In other words, the options market is betting on Bitcoin and rising towards the end of the year.
Deribit noted the following about Implied Volatility (IV), a measure influenced by recent events. The statistic is returning to normal levels, indicating that the market is finally absorbing any risk from FTX: however, options with a short expiration date (December 2) may fall in value due to low trading volume over the weekend.
(…) the postponement of the news flow allowed the implied full to move back from a high-voltage backwardation to a more normal contango term structure a few days ago.
A Christmas miracle?
In the past 24 hours, the trading platform noted, bearish investors have redeemed some of their sell (put) contracts. These investors are betting that Bitcoin will go lower than $10,000. There is still some bearish activity targeting the end of 2022.
However, it is possible for these investors to hedge long spot positions and protect themselves against possible unexpected events. The current state of the crypto market and the possibility of more contagion make this strategy beneficial for long-term investors.
Additionally data provided by Deribit indicates that the industry has a total of nearly $5 billion in Open Interest (OI). Most of this statistic seems to be pointing upwards.
Before the December 30 expiration date, bullish investors are betting that Bitcoin will cross $30,000. The maximum pain scenario, where most options expire worthless, stands at $20,000.