Bitcoin Bulls Recoil as Spotlight on Spot ETF Deadline

• Analysis of Bitcoin Options Pricing Indicates Shift in Bullish Sentiment
• Understanding Call and Put Options
• Expected ETF Decision Influences Traders' Behaviour
• Is the Market Prepping for Action?
• Impact of ETF Announcements on Long-term Volatility
• Seven-Day ATM Implied Volatility Overtakes Longer Duration Indicators

Analysis of Bitcoin Options Pricing Indicates Shift in Bullish Sentiment

Bitcoin$42,260 -0.64% options pricing indicates a reduction in traders' bullish outlook as the U.S. Securities and Exchange Commission's (SEC) deadline of January 10 to endorse spot exchange-traded funds approaches. Amberdata's monitoring of options skew reveals calls expiring in one week, one, two, and three months are trading at approximately 2% premium to puts, compared to 8% in early November. This gradual withdrawal suggests a more cautious bullish sentiment toward bitcoin.

Understanding Call and Put Options

A call option gives the purchaser the right, but not the obligation, to buy the underlying asset at a predetermined price at a future date. A call buyer is inherently optimistic about the market, whereas a put buyer is pessimistic. Options skew measures the relative demand for call options compared to put options.

Expected ETF Decision Influences Traders' Behaviour

Traders may be adopting a wait-and-see approach as the expected decision on ETFs looms. Some market analysts suggest that the cryptocurrency, which has experienced a 61% surge in three months due to ETF expectations, is likely to fall once these much-anticipated offerings become available. The diminishing call bias in longer duration skews aligns with the non-consensus analysis suggesting that ETF inflows spanning billions of dollars will occur gradually, rather than instantly.

Is the Market Prepping for Action?

The one-week options ATM implied volatility, which signifies market anticipations for price volatility over the forthcoming seven days, has nearly doubled on an annualized basis since December 29, exceeding longer duration gauges. This serves as a warning for traders to remain vigilant in the run-up to and immediately following the January 10 deadline.

Impact of ETF Announcements on Long-term Volatility

Longer duration implied volatility gauges have witnessed less significant increases; indicating traders believe ETF announcements will have a transient impact on the degree of price volatility. Furthermore, some market analysts predict ETFs will potentially influence price volatility in the long term.

Seven-Day ATM Implied Volatility Overtakes Longer Duration Indicators

The seven-day ATM implied volatility has escalated beyond longer duration indicators, according to Amberdata. This indicates potential looming market shifts.

Edited by Jonathan Stoker