The Bitcoin Crystal Ball: An Options Trader’s Delight

Bitcoin Call Skew and ETF Optimism Fuel Speculation of Price Surge for BTC

Bitcoin Call Skew suggests more price rise as ETF optimism boosts BTC

If you’re an options trader trying to predict the future of Bitcoin (BTC), boy, do I have news for you! A special gauge that options traders use to forecast the direction of BTC is now flashing the strongest bullish bias we’ve seen in 31 months. It’s like having a crystal ball, but with more money on the line.

This magical gauge, known as the 25-delta one-month call-put skew, measures the relative price of calls compared to puts that expire in four weeks. And let me tell you, it’s shooting up faster than a rocket in a race against time. According to data from Amberdata, it has soared above 10%, hitting its highest level since April 2021. Translation: there’s a greater demand for calls or bullish bets, outweighing the puts and providing a safety net in case things go south.

Now, let’s talk about the driving force behind this bitcoin bonanza: the spot ETF optimism. The excitement surrounding this potential game-changer has propelled BTC above $36,800 on Thursday. And with investors no longer selling calls above the cryptocurrency’s spot price, they’re holding on tight to their virtual money bags, hoping for even greater returns. It’s like hanging on the edge of a roller coaster, waiting for that exhilarating drop.

But that’s not all! Speculators are jumping on the bandwagon and buying call options to get that sweet leveraged upside exposure. It’s as if they’re saying, “Hold my virtual beer while I go all-in on BTC.” And guess what? The longer duration call-put skews, which measure the relative price of calls and puts with expirations over two, three, and six months, are also showing a bias for continued BTC strength. It’s like a never-ending party where everyone’s dancing to the crypto beat.

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Now, let me break it down for you. A call option gives you the right (but not the obligation) to buy the underlying asset at a predetermined price on or before a specific date. It’s like having a golden ticket to Willy Wonka’s chocolate factory, but instead of chocolate, it’s BTC. And let’s not forget the put option, which allows you to sell. It’s like having a virtual pawnshop for your digital assets.

But here’s the plot twist: all these options traders rushing to buy call options have left market makers with a significant net short exposure above $36,000. And when prices climb above that level, these market makers have to buy BTC to balance their books. It’s like a relay race where each runner passes the baton, propelling the rally forward with each step.

So, fellow digital asset investors, buckle up and hold on tight. With this bullish bias in play, we could be looking at some exciting times ahead in the bitcoin universe. It’s like riding a roller coaster, not knowing what twists and turns await us. But hey, that’s the beauty of the crypto world. What will happen next? Well, your guess is as good as mine. And isn’t that half the fun?

Now, if you’ll excuse me, I need to dust off my old options trading hat and join the party. Who knows? Maybe my crystal ball is as accurate as the next guy’s. Happy investing, folks!

Edited by Parikshit Mishra.

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