Despite the recent bullish performance, bitcoin options traders exhibit cautious sentiment, signaling apprehension toward the market outlook and potential downside risks.
Options traders wary amidst bullish momentum
Bitcoin (BTC) has surged by 23% over the past five days, reaching $61,344, yet options traders remain hesitant to adopt a bullish stance. This cautious sentiment stems from concerns regarding a potential downturn, as evidenced by the demand for downside protection options. The last 5% weekly loss for Bitcoin was over five weeks ago, leading traders to seek protection against potential market corrections.
U.S. Bitcoin ETFs experienced a notable influx of $673 million on February 28 alone, accumulating $7.4 billion in net deposits since their launch on January 11. Despite this surge in inflows, options traders appear unconvinced about the sustainability of such growth. Some analysts argue that as Bitcoin’s price rises, demand may taper off, or investors may reach a limit in their risk appetite for cryptocurrency exposure.
Divergent views on ETF momentum
While some traders believe in a “snowball effect” where increasing Bitcoin prices fuel further ETF sales, others are more cautious. Analysts highlight the possibility of diminishing inflows, particularly if the economy undergoes a severe recession or investors face increased financing costs elsewhere. Notably, economist David Rosenberg predicts an 85% likelihood of a U.S. economic recession in 2024, which could significantly impact the cryptocurrency market.
Analysis of the Bitcoin options market reveals a neutral sentiment, with the 25% delta skew fluctuating between -7% and +7% since February 20. This balanced pricing indicates a cautious approach among traders, particularly after Bitcoin failed to breach the $52,500 mark. The anxiety among cryptocurrency investors during the accumulation phases is evident from this data.
Futures market positioning
Traders’ positioning in BTC futures markets provides additional insight, with top traders at exchanges like Binance and OKX displaying a relatively neutral stance until recently. However, as Bitcoin’s price surpassed $53,000, there was a gradual increase in net long positions, possibly driven by forced liquidation of short positions. Despite this, traders at OKX have not reached their highest monthly level in long-to-short ratios, suggesting ongoing skepticism.
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