Traders looking for the next major Bitcoin price swing divinity need look no further than the primary market, specifically options contracts.
That is according to Nick Forster, the founder of the DeFi derivatives protocol, Derive Decrypt On Monday, the options market will begin to see the “start of stimulus season.”
Agitation is the idea that the actions and expectations of market participants affect the price of an asset, and in turn, price fluctuations affect the behavior of participants, creating a feedback loop.
The founder noted that the skew in the 30-day call/for Bitcoin options contracts remains “tracking higher,” meaning traders are betting heavily on upside volatility and are pricing in more significant market swings.
“As prices continue to rise, traders are expecting continued momentum, driving a self-reinforcing price cycle,” Forster said, adding that those traders are targeting prices between $80,000 and $90,000 by the end of November.
As we approach key political and economic events, current market sentiment sets the scene for potentially volatile moves, Forster said, referring in part to the upcoming US presidential election.
It's welcome news for those accustomed to the exchange rate explosion of the world's largest crypto, which has hovered between $53,000 and $64,000 in recent months. The asset fell 1.5% to $63,000 per day, CoinGecko data shows.
Although the options market is small compared to the billions sold in the spot market every day, that could soon change as the big traditional players begin to incorporate the contract into their trading strategy on US-based bitcoin exchanges.
Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell the asset at a certain price before or on a certain date.
By paying a premium, traders can hedge risk or anticipate price movements, but the probability of gain can be high.
On Friday, the Securities and Exchange Commission Greenlight A Rule change The Nasdaq International Securities Exchange has filed for listing and trading of options on iShares Bitcoin Trust (IBIT), BlackRock's flagship ETF.
While the approval of BlackRock's Bitcoin ETF options could lead to long-term skew compression or muted volatility, the impact has yet to be felt, as traditional financial traders ultimately sell covered calls, Forster said.
“For now, we are still seeing strong bidding as traders take advantage of the current volatility product,” he said.
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