Cryptocurrency market conditions have changed drastically; According to an analysis by QCP Capital, the options market in its current state makes the crypto industry look like a major crisis like the shutdown of crypto exchange FTX after filing for bankruptcy never happened.
Trading desk QCP Capital released observations on the crypto industry, revealing some key points to consider for the coming months.
The crypto market is coming back to life
QCP analysis indicates that Bitcoin (BTC) risk reversals have traded in positive territory for the past week, telling us that calls (buying) have been more expensive than puts (selling) across multiple maturities since 2021.
This is unusual for the sector as BTC typically has an ongoing put skew, mainly due to miner/treasury hedging activity. The chart below shows this market behavior and the bullish sentiment affecting the options sector.
Source: QCP Capital
Put skew drives the price of puts up and calls down. This price difference between options is called a skew and under normal circumstances leads to more volatility in put trades than calls precisely because investors are hedging some of their bullish positions.
For the trading desk, this means that sentiment in the cryptocurrency market has shifted from bearish to bullish, a culmination of macro market events and the economy’s modest recovery.
Bulls might break hearts on Valentine’s Day
Ethereum (ETH) implied volatility (IV), which represents the expected volatility of a stock or currency over the life of the option, has fallen, which the analysis says indicates complacency as the market prices down fears of a price drop.
Source: QCP Capital
The enthusiasm in the market can be gauged by the onset of ‘Fear of Missing Out’ (FOMO) with many tracking prices and the top by buying high delta calls and long positions in the spot market over the past week.
With the upcoming “Big Bad” Federal Open Market Committee (FOMC) meeting, the trading desk expects the market to be more cautious and conservative.
According to the QCP, the next potentially troublesome date will be Feb. 14, when the following CPI report will come out, potentially “breaking bulls’ hearts.”
For QCP, this is the same scenario the market experienced in December. Similarly, the price can experience a breakout to the upside, characterized by a very sharp and violent move.
Bitcoin is currently trading at $23,200 and appears to be paving the way for conquering new levels. It is up 0.7% in the last 24 hours and 10.3% in the last seven days. Bitcoin is attempting to clear the next obstacle represented by the $24,400 level.
BTC price with some gains on the daily chart. Source: BTCUSDT trade view
Ethereum is trading at $1600, up 0.3% in the last 24 hours, with sideways price action. The next wall of resistance stands at $1,691, a zone the bulls have not visited since September 2022. Ethereum is up 3.8% over the past seven days.
ETH price is moving sideways with some gains on the daily chart. Source: ETHUSDT trade view
Cover photo by Unsplash, charts by Tradingview.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.