By
Bena Ilyas
May 9th, 2024
Despite Bitcoin’s surging price, block trades show restrained activity. The market sees more selling calls and buying puts, signaling cautious trader sentiment.
A historically indicative signal for bearish positions is now suggesting positive prospects for Bitcoin (BTC) bulls. Investors in the world’s largest cryptocurrency are eagerly anticipating a crucial regulatory decision on a US exchange-traded fund (ETF) product. Jim Cramer, former hedge fund manager and CNBC’s Mad Money host, asserted in a recent TV segment that Bitcoin was “topping out”, a sentiment he expressed just days after declaring Bitcoin’s enduring significance.
Cramer emphasized a straightforward approach, advising those interested in Bitcoin to directly buy the cryptocurrency. Despite Cramer’s view, Bitcoin witnessed an 8% increase on Monday, briefly reaching $47,100, marking its highest level since April 2021.
JIM CRAMER ALERT🚨🚨🚨:
“I think Bitcoin’s topping out.”#Bitcoin🚀🚀🚀 pic.twitter.com/mt8TwwtPDL
— Swan (@Swan) January 9, 2024
Cramer’s evolving stance on Bitcoin and cryptocurrencies has become a focal point for investors and market analysts, often serving as a counter-indicator in crypto circles. This phenomenon has given rise to what is colloquially known as the “reverse Cramer” effect, wherein his predictions are met with a level of skepticism.
A notable instance was in June when his suggestion to exit the crypto markets coincided with a significant buying opportunity. In hindsight, it becomes evident that the market was undergoing an extended consolidation phase during that period.
On Monday, January 8, the Bitcoin price surged past $47,000 amid growing excitement around the Bitcoin ETF approval.
A Look at Bitcoin Options Data
Looking at the Bitcoin options data, Jim Cramer might not be completely wrong regarding the topping out of Bitcoin price.
Recent developments in the cryptocurrency market suggest an imminent arrival of Exchange-Traded Funds (ETFs), creating a surge in FOMO sentiment, especially during US trading hours. Bitcoin, responding to this anticipation, reached a new high of $47,000.
However, the options market is delivering mixed signals. Short-term Implied Volatilities (IVs) experienced a significant decline, with the current At-The-Money (ATM) option IV for the 11th of June dropping below 90%, marking a 30% decrease within a few hours. Other terms in the options market also displayed notable declines.
In contrast to the heightened activity in Bitcoin’s price, block trades during the breakout to new highs have been relatively restrained. The market observed a dominance of selling calls and buying puts, indicating a cautious approach among traders.
A noteworthy aspect is the participation of institutional investors who initiated short positions in the ETF market during its peak momentum. This strategic move raises questions about the future trajectory of the market and introduces an element of uncertainty amid the anticipation surrounding ETFs. The interplay of these factors adds complexity to the evolving landscape of cryptocurrency trading.