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In summary
- Bitcoin traders are showing a mixed reaction in the derivatives market following the Jackson Hole economic symposium, balancing optimism for future gains with caution about the speed of any potential rally.
- There has been an increase in buying of call spreads, signaling bets on further price increases, but also significant selling of Bitcoin call options with a strike price of $100,000, especially for contracts extending to March 2025.
- Despite recent gains in Bitcoin and Ethereum, volatility indicators show a shift towards put options, reflecting concerns about potential downside risks into October.
Bitcoin traders are seeing a mixed reaction in the derivatives market following the Jackson Hole Economic Symposium (annual meeting of economists) on Friday, balancing optimism for future gains with caution about the speed of any potential rally.
The market has seen an increase in buying of call spreads, a sign that traders are betting on further price increases, QCP Capital wrote in its most recent note.
However, there has also been significant selling of Bitcoin call options with a strike price of $100,000, especially for contracts extending until March 2025, according to data from BasedMoney.
This suggests that while sentiment remains generally bullish, traders are not anticipating a sharp or immediate price increase, according to QCP.
Despite recent gains in Bitcoin and Ethereum, volatility indicators show a shift towards put options, reflecting traders’ concerns about potential downside risks into October.
Implied volatility, a key measure in options trading that estimates future price movements, is skewed toward put options, indicating greater concern about potential price declines than optimism about price increases.
In simple terms, although Bitcoin and Ethereum have been rising, more traders are hedging against a potential decline by buying put options.
A put option is a type of financial contract that gives the holder the right to sell an asset at a specific price within a certain period. When traders buy put options, it usually indicates that they are concerned that prices may fall and are looking to protect themselves.
These developments follow the prevailing bullish sentiment after US Federal Reserve Chairman Jerome Powell hinted that the central bank could begin cutting interest rates as early as next month, with Bitcoin responding with a price surge.
Moreover, the recent price increase has not been accompanied by a corresponding increase in volatility, signaling caution among traders, QCP said.
With short-term volatility easing, Bitcoin is expected to remain range-bound between $62,000 and $67,000, at least until October, he added.
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