Bitcoin Starts Week Above $17K, Sentiment Turns Upbeat
Bitcoin is seeing some green during this week’s market open and looks set to regain higher levels in the near term. The number one crypto by market capitalization experienced some of the worst months in history, but the bulls were able to hold the line around $15,500.
Now the macroeconomic outlook is changing and could begin to support further gains for risk assets. At the time of writing, Bitcoin is trading at $17,200 with 2% and 5% gains in the last 24 hours and seven days respectively.
The Bitcoin market is getting back to normal
Data from crypto derivatives exchange Deribit indicates a shift in market sentiment. Participants are more optimistic about Bitcoin after the collapse of crypto exchange FTX and the fall from grace of its co-founder and former CEO Sam Bankman-Fried.
This event pushed Bitcoin to a new yearly low and back to 2020 levels. As shown in the chart below, the BTC Open Interest Weighted Annualized Basis shows that the prices of options contracts were in reverse.
In other words, options were cheaper than their underlying asset, Bitcoin, after the FTX collapse. The last time BTC saw similar retracement was in July 2021, during the second capitulation event that triggered a 40% crash in the crypto market.
However, the chart shows that in July 2021, the market sentiment and decline was far from the levels of November 2022. In addition, the chart shows that the heavy selling triggered by recent events is waning, and the crypto market is normalizing. Deribit said:
On July 21, the entire curve did not invert as the longer-dated contracts were still trading at a premium. Since 8 November this year, however, we see the entire basket trading below spot.
BTC’s short-term price rally is more likely
Along with the above, Deribit claims that the BTC 25 put bias, a metric used to gauge market sentiment by looking at the demand for put (put) option contracts, and their implied volatility is also on the decline. Puts were expensive during the FTX fallout, but are returning to their “normal” levels. Deribit said:
A decrease in the 1-month bias indicates that the shorter output of the money calls is becoming more expensive in relation to the out-of-the-money outlay.
In other words, the market participants buy several call (purchase) contracts. These options have a short-term expiration date. In this way, people can prepare for a Christmas or year-end rally.
As NewsBTC reported, the maximum pain point, the strike price at which a large portion of the contract will expire worthless, is at $20,000.
