- After a rally during the Ides of March, bullish call option demand has rallied alongside demand for Bitcoin.
- According to cryptocurrency derivative analytics firm Genesis Volatility, the 180-day Bitcoin call option implied volatility is now trending higher relative to bearish put options, reversing a 2-month trend.
The Bitcoin rally was unfortunately short-lived.
Having breached the important resistance at US$45,300, Bitcoin has now given up some of those gains to return to US$44,500 at the time of writing (GMT 0400) but investors charting the next course for the benchmark cryptocurrency may need to look beyond the tips of their noses to smell what’s coming next.
After a rally during the Ides of March, bullish call option demand has rallied alongside demand for Bitcoin.
According to cryptocurrency derivative analytics firm Genesis Volatility, the 180-day Bitcoin call option implied volatility is now trending higher relative to bearish put options, reversing a 2-month trend.
Short-term options which had been bearish are also now tending towards a more neutral market while appetite for leveraged long exposure in futures has increased.
Since January, the Bitcoin options market’s skew has been negative, meaning that premiums for bearish put options (the right to sell at a predetermined price) has been higher than premiums for bullish call options (the right to buy at a predetermined price).
But on Wednesday, this skew turned positive for the first time since January, suggesting that traders are now hedging more in terms of the upside – where the price of Bitcoin rallies.
Depending on how traders use options, whether to hedge risk or generate returns, that positive skew for Bitcoin options suggests that traders are now more concerned about a further rise in Bitcoin’s price, having rejected a capitulation below US$40,000.
Traders who are bearish on Bitcoin would still want to have options to cover them in case the cryptocurrency should rally hard and the rising premiums for bullish call options seems to reflect that the recent pullback in Bitcoin’s price rally could be temporary.
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