Bitcoin Options Markets Reveal Investors Still Bullish, Despite Repeated BTC Price Failures to Test $30K
Despite repeated failures by the Bitcoin price to test the $30,000 level in recent weeks over the course of the last three weeks, investors remain bullish, according to options market data presented by crypto analytics firm The Block.
Bitcoin has spent the last three weeks trading with $1,500 of the $28,000 level as bulls take a breather in wake of a stunning rally since the start of the year.
Year-to-date, Bitcoin is up in the region of 70%.
And options markets suggest investors are positioned for the upside to continue.
The widely followed 25% delta skew of Bitcoin options expiring in seven, 30, 60, 90 and 180 days were all in the 2-5 region as of Tuesday, with most broadly unchanged in the past three weeks, as is the case with the Bitcoin price.
The 25% delta options skew is a popularly monitored proxy for the degree to which trading desks are over or undercharging for upside or downside protection via the put and call options they are selling to investors. Put options give an investor the right but not the obligation to sell an asset at a predetermined price, while a call option gives an investor the right but not the obligation to buy an asset at a predetermined price.
A 25% delta options skew above 0 suggests that desks are charging more for equivalent call options versus puts. This implies there is higher demand for calls versus puts, which can be interpreted as a bullish sign as investors are more eager to secure protection against (or bet on) a rise in prices.
Importantly for the longer-term Bitcoin bulls, the 180-day skew (last at 5.4) remains close to its highest level since late-2021, reflective of the market continuing to become more and more bullish on Bitcoin’s longer-term prospects.
Bitcoin Price – Where is it Headed Next?
Technicals and upcoming macro risk events will likely determine whether Bitcoin’s next stop is a jump above $30,000 or a pullback towards $25,500 support.
The last few weeks of consolidation mean that the BTC price is now squeezing within the confines of a pennant technical structure.
These structures often form ahead of big range breakouts that can go in either direction.
An upside breakout would likely bring an imminent test of $30,000 into question, while a downside breakout would open the door to a retest of support in the $25,500 area.
Meanwhile, though Bitcoin has continued to find support above its 21DMA this week, its price is seeing bearish divergence with the 14-Day Relative Strength Index (RSI), adding to the mixed near-term technical picture.
Data out of the US this week has largely fed into the idea that the lagged effects of the Fed’s aggressive tightening over the past 12 months are finally starting to hit and that a US recession later this year is likely, supporting the narrative that the Fed will soon pivot to a cutting cycle.
But Friday’s US jobs data could make or break this narrative. If the data is stronger than expected, this could send Bitcoin lower, and vice versa.
Bitcoin Bulls Likely to Aggressively Buy Any Short-term Dips
However, amid a cocktail of positive longer-term technicals, on-chain developments and macro fundamentals, Bitcoin bulls are likely to aggressively buy and short-term dips that the BTC price might endure.
Starting the positive longer-term technicals - Bitcoin’s recent strong bounce from its 200DMA (and Realized Price) under $20,000 and the “golden cross” seen in early February are very bullish long-term technical signs for the cryptocurrency.
Elsewhere, various metrics pertaining network activity, as well as various longer-term focused on-chain indicators, such as those grouped in Glassnode’s “Recovering from a Bitcoin Bear” dashboard, are all flashing signals that a new bull market is here.
Meanwhile, it seems highly likely that crypto continues to derive tailwinds from the macro backdrop this year as 1) US growth weakens and 2) bank troubles continue to bubble meaning 3) the Fed is inexorably forced into a rate-cutting cycle, meaning easier financial conditions and more liquidity, a great environment for crypto.
Of course, the above assumptions about how things will turn out on the macro front are far from certain.
Perhaps inflation remains too elevated for the Fed to start cutting rates this year.
That would risk worsening the US recession, but would also risk reigniting the bank crisis, which could nonetheless still support Bitcoin as a safe haven.
Arguably the worse outcome for crypto from a macro standpoint would be if US growth surprises strongly to the upside (i.e. no recession), and inflation remains hot, putting the Fed on course to take interest rates into the mid-5.0% range (rather than current market expectations for cuts towards 4.0% by the end of this year).
But recent economic data is making this scenario more and more unlikely, meaning macro will probably remain support for crypto in the medium-to-long term.
Analysis of Bitcoin’s longer-term market cycles also suggests a new Bitcoin bull market is here.
According to the Bitcoin Stock-to-Flow pricing model, the Bitcoin market cycle is roughly four years, which shows an estimated price level based on the number of BTC available in the market relative to the amount being mined each year.
Bitcoin’s fair price right now is around $55K and could rise above $500K in the next post-halving market cycle - that’s around 18x gains from current levels.
Finally, Blockchaincenter.net’s popular Bitcoin Rainbow Chart shows that, at current levels, Bitcoin is in the “BUY!” zone, having recently recovered from the “Basically a Fire Sale” zone in late 2022. In other words, the model suggests that Bitcoin is gradually recovering from being highly oversold. During its last bull run, Bitcoin was able to reach the “Sell. Seriously, SELL!” zone.