Bitcoin Shakes Out of Bear Market, Aims for $20,000 by Year-End

Bitcoin remains range-bound, hovering near yearly lows, with some bullish momentum in the short-term. Cryptocurrencies suffered from the FTX crash and subsequent contagion, but market participants appear to be more optimistic about potential profits.

At the time of writing, Bitcoin has fallen back to yesterday’s highs. BTC is trading at $16,500, trading sideways 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.

The price of BTC is trading sideways on the daily chart. Source: BTCUSDT Tradingview

Bitcoin Sentiment Improves Derivatives Sector

Data from the Options platform Deribit express The shift in sentiment has affected the industry. The FTX debacle and uncertainty over other crypto firms such as Digital Currency Group (DCG) and crypto lender Genesis have kept markets on their toes.

The latter company stopped customer withdrawal requests and is seeking to raise emergency funds to resume operations. According to rumors that circulated last week, Genesis’ parent company, DCG, could be affected.

The company dismissed the speculation and reiterated its long-term intention to stay in the industry. As a result, the cryptocurrency market rebounded as investor confidence grew. Additionally, the Fed signaled a possible turnaround.

These two factors support the bullish momentum. Deribit noted that bulls took advantage of last week’s downside price action to accumulate call options (buy orders) at low prices.

Optimistic investors are buying calls to December at strike prices above $17,000, $18,000 and $19,000. In other words, the options market is betting that Bitcoin will trend higher by the end of the year.

Deribit notes the following information about Implied Volatility (IV), an indicator affected by recent events. The indicator is returning to normal levels, suggesting that the market is finally absorbing any risk associated with FTX: however, options with a close expiry date (Dec. 2) may lose value due to low trading volume over the weekend.

(…) The easing of news flow has also allowed implied volatility to ease back into a more normal contango term structure from high backwardation a few days ago.

Bitcoin BTC BTCUSDT Chart 2Implied volatility in BTC options drops after FTX crash.Source: Deribit

Christmas miracle?

The options venue noted that bearish investors have been selling some sell (sell) contracts over the past 24 hours. These investors are betting that bitcoin will fall below $10,000. There is still some bearish activity targeting the end of 2022.

However, these investors may be hedging their long positions and protecting themselves from potential unexpected events. The current state of the cryptocurrency market and the possibility of more contagion make this strategy beneficial for long-term investors.

Other data provided by Deribit shows that the industry’s total open interest (OI) is close to $5 billion. Most of the indicator appears to be in an uptrend.

Bullish investors are betting that Bitcoin will surpass $30,000 for the December 30 expiry. The maximum pain scenario where most options expire worthless is $20,000.

Bitcoin BTC BTCUSDT Figure 3BTC options open interest for December 30 expiry.Source: Deribit

Information source: compiled from NEWSBTC by 0x information.Copyright belongs to the author, without permission, may not be reproduced

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