in the wake of Bitcoin latest dip below the $21,000 level on Thursday as traders reflect on headwinds, including a growing liquidity crunch among major cryptocurrency-friendly banks and ongoing macro headwinds As the US Federal Reserve points out risks, Bitcoin Options have turned more bearish on the near-term price outlook for cryptocurrency this year.
BTC/USD last traded at $20,700, up more than 5.0% in the last 24 hours according to CoinMarketCap and is now down roughly 18% from previous yearly highs at $25,000. At the same time, the delta bias of 25% of Bitcoin Options expiring 7 days from now on Thursday fell to around -6, the lowest level since late December 2022.
The 25% delta options bias is a popularly monitored indicator of the degree to which trading desks overcharge or undercharge to protect themselves to the upside or downside through the put and call options they sell to investors. Put options give an investor the right but not the obligation to sell an asset at a predetermined price, while a call option gives an investor the right but not the obligation to buy an asset at a predetermined price.
A delta option bias of 25% above 0 suggests that desks are charging more for equivalent call options than put options. This implies that there is higher demand for calls versus puts, which can be interpreted as a bullish sign, as investors are more eager to hedge against (or bet on) rising prices.
Long-term price remains firm for now
While the delta bias of the 25% options expiring in 30 and 60 days also fell to their lowest levels of the year of around -3 and -2 respectively, the delta bias of the 25% options expiring in 90 and 180 days has been holding, with both staying close to zero. That suggests investors are viewing the current headwinds facing the market โ crypto bank crashes, increased scrutiny from US regulators, and the Federal Reserve's continued tightening efforts โ unlikely to do anything. for Bitcoin to fall steadily from current levels.
Options markets are also sending the message that Bitcoin investors remain fairly bullish on price volatility risks. Implied volatility under At-The-Money (ATM) options that expire in 7, 30, 90, and 180 days has been virtually unchanged over the past month.
Meanwhile, Deribit's Bitcoin Volatility Index (DVOL) is also largely unchanged from recent weeks at 49, and still not much above the all-time lows of 42 it reached earlier this year.
What's next for Bitcoin (BTC)?
Bitcoin's latest price collapse has opened the door for a possible drop below the $20,000 level. But traders will be watching for near-term support in the $19,700-800 region in the form of the 200-day moving average and price realized, a level which, if retested, could attract significant buying interest.
Looking at Bitcoin over a longer time horizon, Bitcoin's latest decline still leaves it within the ranges of the past eight months. While there may be more downside in store, with Bitcoin only erasing 50% of its rally from its November 2022 lows, it's still too early to bet on new bear market cycle lows for the world's largest cryptocurrency. by market capitalization.
In the near term, US employment data for February scheduled for release on Friday and next week's US CPI report will be key in determining near-term momentum. The bulls are expecting surprises on the downside that could ease concerns about the Federal Reserve's tightening and provide the BTC price with some room for a recovery.
