Is Bitcoin around the Corner?

Are Bitcoin and Ethereum finally back? That seems to be the case if crypto options traders are anything to go by.

According to crypto market maker OrBit Markets, the mark of bitcoin options traded on Deribit, one of the leading exchanges for crypto-oriented products, increased by 83% in January compared to December. Ether options increased by 38.5%.

With far more investors positioned for price growth, volume is directed towards increased call options – issuing a premium for an option to buy Bitcoin or Ether in the future at an agreed price – rather than buying options.

Calls accounted for 71.14% of all open interest in Bitcoin futures and 77.55% for Ether.

However, the increase in volume also indicates that investors are ambivalent about the moves in the crypto markets and prefer low-risk, low-reward options rather than buying Bitcoin or Ether.

The rally in options markets after months of subdued trading and pessimistic volatility coincides with a 40.5% jump in bitcoin’s price in January – its best month since 2021 – and a 32.5% swing for Ether.

Bitcoin’s rally was explosive, like imagining the release of a beach ball that went underwater.

Recession fear

Total open interest in bitcoin futures — which measures the volume of outstanding contracts — across all expirations, was 293,001 on Jan. 27, the highest in real terms since November. At the same time, the call-to-call ratio was 0.43, the lowest in at least a year. According to Laevitas data, traders slightly preferred calls over overbuys.

The macro backdrop of a potential US downturn or further tightening by the Federal Reserve is just one of several factors that could push the current stock.

After better-than-expected US jobs data came in last week, markets are betting that the Fed could raise interest rates more than expected, which could dampen demand for riskier assets like cryptocurrencies.

A futures trend may not necessarily be an uptrend for Bitcoin or Ether, as investors also use these derivatives as hedges against declines in other investments.