In the world of cryptocurrency trading, a bullish flow reminiscent of the 2020-2021 bull market has emerged, with traders eagerly purchasing bitcoin calls at levels surpassing the current market rate. Despite concerns over potential price drops due to overbought technical conditions and the possibility of selling pressure from bankrupt crypto lender Genesis, crypto traders are showing confidence by snapping up cheap out-of-the-money (OTM) bitcoin calls or bullish options bets, particularly around the cryptocurrency's lifetime high of $69,000.
Over the weekend, Deribit, the world's leading crypto options exchange, witnessed a flurry of activity, with many call options at strikes $65,000, $70,000, and $75,000 changing hands. On Deribit, each options contract represents one BTC, with call options granting investors the right to buy the underlying asset at a specific price by a stated date. This surge in higher strike call purchases reflects a bullish sentiment among sophisticated market participants.
Kelly Greer, Head of Americas Sales at Galaxy, highlighted the concentration of open interest in $50k calls and observed flows in $50K, $60K, and $75K calls in the listed options markets from April to June maturities. According to Greer, these flows indicate conviction from buyers willing to pay a premium for these positions, suggesting a constructive view on bitcoin's future.
Historically, positioning in the options market has served as a reliable indicator of impending price swings. The current bullish flows echo the patterns observed during the 2020-2021 bull market, where sophisticated participants consistently bought calls at strikes of $80,000 and higher at discounted prices.
Despite bitcoin's nearly doubled price to $50,000 since early October, concerns have arisen due to overbought conditions signaled by the cryptocurrency's 14-day relative strength index (RSI) rising above 70. An RSI above 70 typically indicates overbought conditions, suggesting a potential bearish trend reversal or a short-term correction. However, it's important to note that such conditions may only imply a rapid rally in the market, prompting caution rather than immediate panic.
Alex Kuptsikevich, a senior analyst at FxPro, highlighted caution among traders as bitcoin's gains slowed over the weekend, coinciding with the RSI surpassing 70 on daily timeframes. This development could lead to increased appetite for short-term profit-taking and heightened vigilance as the cryptocurrency approaches the January peak.
In conclusion, while bullish sentiment prevails in the bitcoin options market, traders remain cautious amidst overbought conditions and technical indicators signaling potential market corrections. The influx of higher strike call purchases reflects optimism among investors, but it's essential to monitor market dynamics closely to navigate potential price fluctuations effectively.