Bitcoin Options Traders Anticipate Short-Term Price Correction

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Bitcoin Options Traders Anticipate Short-Term Price Correction

Last updated on May 18th, 2024 at 12:44 pm

Bitcoin options traders are bracing for a possible short-term price pullback despite the revised report on CPI inflation in the U.S., which is based on CF Benchmarks’ analysis of options on futures of CME bitcoin.

Bitcoin Breaks Out Amid Inflation Report

The analysis detects that while bitcoin saw a breakout above $66,000 after the favorable inflation report, higher implied volatility for OTM puts is still displayed than for calls. This implies that the premium put on OTM derivatives traders has gone higher, hence being bearish as a short-term market indicator. The rise in implied volatility for OTM puts demonstrates that the trader is protecting against the possible drop in the bitcoin price. Implied volatility (IV) is used in the options world to predict a priced asset’s likely future price fluctuations.

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On the contrast side, they did not see flat curve volatility, with a slight bias towards puts based on longer-term puts and calls. This, therefore, represents the fact that investors are confident about Bitcoin’s prospects in the long term. The researchers stated that there is a possibility of watching the skew to calls increase when the positive effect of CPI on inflation is felt. The sideways move for longer-dated put and call options could also be considered a frequently participated activity of institutional investors, as sentiment swings less influence them.


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CME Eyes Bitcoin Spot Market Launch

The Financial Times they were informed that the CME Group is also studying the introduction of spot trading of bitcoin along with its already available futures products. The team is discussing this possibility with traders who trade on exchanges based on crypto on a regulated platform. The bitcoin spot trading launch on CME would give traders access to profit via basis trades in the spread between futures prices and the price of the concrete asset. CME Group, which is the owner of the biggest futures market in the world, settled bitcoin futures trading.

Bitcoin option traders buy put options to protect themselves from a possible price decline in the short term, but at the same time, they are confident of the long-term picture. The potential addition of the bitcoin spot trading by CME Group to the market players could also have a profound effect on the market, thus providing new chances for investors. As the market gets through these developments, the trade strategies and decisions of options traders will become increasingly crucial to the future of Bitcoin.

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