The Bitcoin Options Market (BTC), which is largely dominated by Deribit and CME, provides a 9% opportunity for BTC to reach its historic high of $20,000 by the end of 2020.
Given Bitcoin’s tendency to see a prolonged rally six to eight months after a halving is triggered, option market traders are relatively cautious about the medium-term trend of BTC.
The price of bitcoin is trading sideways as it slowly approaches $10,000
The data shows that the BTC option market is leaning towards the upside
In the short term, many traders in both Deribit and CME are apparently optimistic about the trend of BTC prices.
According to data from ecoinometrics, CME’s Bitcoin options exchange recorded 22 sales for every 1 purchase. In simple terms, for every 22 people who bought BTC, one person sold.
Bitcoin sales vs. purchases at the CME option exchange. Source: ecoinometrics
The basis for the optimism towards short-term Bitcoin price action by option traders is probably the consecutive tests of the USD 10,000 resistance level.
When a crucial level is tested three or four times, either support or resistance, it has a high probability of breaking. In the last 11 days, Bitcoin tested USD 10,000 in total five times, weakening the resistance.
Options traders, most of whom are professionals, expect
- Bitcoin Investor
- Bitcoin Capital
- Crypto Cash
- Ethereum Code
- Bitcoin Loophole
to price above $10,000 in the immediate term, which is also supported by improved sentiment around high-risk assets such as individual stocks.
Will the price of Bitcoin collapse again due to the U.S.-China trade war?
Why aren’t traders bullish in the long run?
The price of Bitcoin tends to move in extreme cycles. It has long been speculated that aggressive buying and selling by whales at the high and low points causes BTC to see large price swings.
Options traders may not feel comfortable placing medium- to long-term bets on the price of Bitcoin due to its unpredictability in current conditions.
In previous halvings, it took about six to eight months for the price of Bitcoin to start a long rally. Therefore, the May 2020 halving does not guarantee that BTC’s price will reach an all-time high by the end of the year.
That said, there are still several positive data points that support the predictions of a record Bitcoin price for Q4 2020.
As an example, Bitcoin is about to see the seventh golden cross in history if BTC’s price remains above $9,500 in the coming days.
With Bitcoin’s price testing at $10k, the bullish regime is within reach in the coming weeks, according to Glassnode
Bitcoin is also far from showing the over-sold conditions in the higher time frames. The weekly chart shows that several momentum oscillators indicate that the ongoing rally may extend beyond the $10,000 to $11,000 range.
Both the Golden Cross and the weekly MACD are relatively short term indicators, which can be the catalyst for optimism in the options market.
For now, the confluence of several factors, including Bitcoin volatility in highly uncertain environments such as the current one caused by the coronavirus pandemic, seems to be causing option traders to be more cautious in long term trading.