By
Temitope Olatunji
April 29th, 2024
The surge in options trading at prices exceeding $65,000 on Deribit reflects the growing confidence among traders in Bitcoin’s potential for further gains.
As Bitcoin (BTC) continues its upward movement reaching heights of over $50,000, a recent pattern has formed on the derivatives market Deribit, with traders actively acquiring options contracts at prices surpassing $65,000.
Insights from Deribit’s Bitcoin Options Activity
Over the weekend, Deribit witnessed a surge in trading activity, particularly in out-of-the-money (OTM) call options for Bitcoin. These options, with strikes at $65,000, $70,000, and $75,000, saw substantial interest, indicating a strong conviction among investors regarding Bitcoin’s potential for further gains.
This surge in options activity at such high price levels indicates growing confidence among traders in Bitcoin’s potential for further upward movement. Options contracts allow traders to bet on the future price of an asset without having to purchase the asset itself, providing them with flexibility and risk management strategies.
“These flows demonstrate conviction from buyers willing to pay a premium to take on these positions, suggesting investors have a constructive view on Bitcoin,” noted Kelly Greer, Head of Americas Sales at Galaxy.
This surge in bullish options activity is reminiscent of similar patterns observed during the 2020-2021 bull market, where investors consistently bought calls at strikes above $80,000 at attractive valuations. Such positioning in the options market has historically served as a reliable indicator of impending price swings, indicating that sophisticated market participants are anticipating further upside potential for Bitcoin.
Caution Amid Bitcoin Overbought Conditions
Amidst the optimism, concerns bordering on overbought conditions persist. Bitcoin’s 14-day relative strength index (RSI), a popular technical analysis tool, has surged above 70, signaling overbought conditions in the market. While an overbought reading does not necessarily guarantee a bearish reversal, it suggests that the market may have rallied too quickly and could undergo a corrective phase.
Alex Kuptsikevich, Senior Analyst at FxPro, highlights the caution building among traders, stating:
“Bitcoin posted its seventh consecutive day of gains, but the strengthening slowed over the weekend. It also coincided with a move above 70 on the RSI on the daily timeframes, which could increase players’ appetite for short-term profit-taking. Caution is also building as we approach the January peak.”
Additionally, concerns have emerged regarding the impact of Genesis’ forced sale of $1.6 billion in Bitcoin, Ethereum (ETH), and Ethereum Classic (ETC) following its bankruptcy filing. The sale of these assets could exert downward pressure on prices, adding a layer of uncertainty to the market outlook.
Overall, the surge in options trading at prices exceeding $65,000 on Deribit reflects the growing confidence among traders in Bitcoin’s potential for further gains. Despite concerns about overbought conditions and potential selling pressure from Genesis, traders remain optimistic about Bitcoin’s long-term prospects, drawing on the potential impact of the spot Bitcoin ETF products. However, caution is warranted as the market navigates through these uncertainties.
As of the latest data, Bitcoin is trading at $50,196, up by 4% in the last 24 hours, with market capitalization standing at $979.9 billion.