What to know:
- BTC has erased the new year gains with inflation-adjusted yields hitting multi-month highs.
- Deribit-listed options continue to show a strong bullish bias.
2021 started off on a positive note as bitcoin (BTC) approached $100,000, marking a recovery from its lower prices in December. However, amid the excitement, CoinDesk cautioned against excessive optimism, highlighting the presence of potential sellers aiming to regain control.
After struggling to maintain its growth above $100,000 on Monday, Bitcoin (BTC) has retreated to around $93,000, as per CoinDesk’s latest data.
Currently, we’re experiencing a recent drop (downturn) coinciding with heightened fluctuations in the U.S. Treasury market. This is because long-term interest rates have climbed following the Q4 2024 rally, reaching levels not seen for several months, largely due to persistent inflation indicators within the U.S. economy.
Not only nominal bond returns are increasing, but real yields – those adjusted for inflation – are also on the rise. The yield on a 10-year U.S. Treasury Inflation-Protected Security has climbed to 2.29%, marking its highest point since November 2023, as indicated by TradingView’s charting data.
As the return on safe, income-generating investments becomes more appealing in terms of their ability to keep up with inflation, there’s less motivation to invest in assets that come with greater risk. This is especially true when the increase in returns is due to anticipations of a more aggressive monetary policy by the Federal Reserve (Fed), rather than improvements in the economy itself.
This week, I find myself observing an interesting trend. The data seems to indicate persistent inflation, leading market traders to adjust their forecast for the Federal Reserve’s next interest rate cut to June.
This morning, I’ve noticed a drop in the spot bitcoin price, and it seems this might be due to the increase in yields in the Treasury market and the diminishing chances of additional rate cuts this year. This shift has affected the short-term perspective for crypto assets, as they typically thrive in more liquid conditions. According to Thomas Erdosi, head of product at CF Benchmarks, he shared this insight with CoinDesk.
It’s important to understand that the surge in yields isn’t limited to the United States. In fact, yields are rising significantly across significant global economies. Notably, Japan and the United Kingdom have also become part of this trend. In the U.K., yields at the long end are at their highest point since 1998.
The current situation appears to be affecting stock markets in much the same way as Bitcoin (BTC). Notably, significant indexes such as the Nasdaq and the S&P 500 have now relinquished their initial yearly growth.
However, here’s an unexpected turn: Although there are significant uncertainties in the broader market, the Deribit options market for Bitcoin is surprisingly upbeat. As we speak, the worth of active calls stands at approximately $14.87 billion, which is almost double the value of active puts, as reported by Amberdata.
A call buyer is implicitly bullish on the market while a put buyer is bearish.
Additionally, it’s worth noting that the call option with a strike price of $120,000 is the most frequently traded, boasting a total value of approximately $1.47 billion in open interest. Furthermore, options at strikes of $101,000 and $110,000 also have significant open interest, each exceeding $1 billion. Lastly, the popular put option with a strike price of $75,000 has an open interest of around $595 million.
From my perspective as an analyst, I observe a consistent trend where call options, those that expire beyond January, are trading at a noticeable higher price compared to put options. This disparity suggests a predominantly optimistic outlook among traders, indicating a bullish bias in the market.
There’s a possibility that the market situation might shift positively by the end of this month. The inauguration of President Trump on January 20th could significantly increase the chances of a more favorable regulatory climate for cryptocurrencies, which may significantly influence the overall sentiment in the crypto market,” Erdosi stated.
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2025-01-09 17:22