Crypto News

The Options Market Expects Bitcoin’s Consolidation to Persist; Why They’re Wrong

Bitcoin has been caught in the throes of an unrelenting bout of consolidation throughout the past several days and weeks, struggling to garner any clear trend.

Although it has technically been ranging since the start of May, its trading channel has been narrowing over the past month, with it now trading between $9,000 and $9,300.

It does appear that the cryptocurrency is growing weak, however, as it has flashed some bear-favoring signs over the past few days.

Currently, BTC is at risk of breaking below the lower boundary of this trading range, which could be enough to spark a sharp descent that sends it reeling lower.

Despite this, the options market seems to think that the benchmark digital asset will continue seeing limited volatility in the days and weeks ahead, with its implied volatility term structure being record steep.

Bitcoin Flashes Signs of Weakness as Technical Outlook Grows Dim

At the time of writing, Bitcoin is trading down by 1% at its current price of $9,050.

This is around where it has been trading at for the past week, but sellers are now trying to force it below $9,000.

The strong defense of this level that has been posted by bulls in recent times certainly bolsters the crypto’s outlook, but it remains vulnerable to seeing further downside as it hovers just a hair above this level.

$9,000 has been established as a crucial level for over eight weeks now. Its response to this level could ultimately play a role in its next mid-term trend.

This trend may begin developing soon.

One popular crypto analyst spoke about several data points suggesting that a significant volatility spike is imminent.

He notes that open interest on BitMEX has been growing and is now approaching $700 million, BTC’s realized volatility is now at an over 1-year low, and that there have been eight drops beneath $9,000 in the past two months.

“Many data points suggest a big spike in volatility is near. BitMEX OI building (near $700m), realized volatility at 1-year low (Skew data), and 8 drops below $9k in 2 months. For now, it seems bears have an edge going into next week.”

The Options Market Seems to Think BTC Will Keep Consolidating 

Data from analytics platform Skew shows that Bitcoin is currently forming one of its steepest implied volatility term structures ever seen.

“Bitcoin having one of its very quiet moment, implied volatility term structure is record steep.”

Bitcoin

Image Courtesy of Skew.

This indicates that implied volatility for options contracts with an imminent expiration is significantly lower than those with an expiration date in the distant future – meaning that options traders expect limited near-term volatility.

The above data points, however, seem to invalidate this notion.

Featured image from Shutterstock.

How useful was this post?

Click on a star to rate it!

As you found this post useful...

Follow us on social media!

Write a Comment

Related Crypto News

Monero’s Hashrate Experienced Its Largest Single Day Gains Ever
Monero has experienced its biggest single day gain in hashrate since its creation back in 2014. August 6, Monero...
Bitcoin Plunges Under Pivotal $11.5k Support: What Do Analysts Think Is Next?
Bitcoin is slipping lower after peaking at $11,950 just the other day. This marked the second major rejection at...
Price Analysis 8/7: BTC, ETH, XRP, BCH, BSV, LTC, ADA, LINK, BNB, CRO
Bitcoin and altcoins might consolidate or correct marginally for a few days before a possible breakout to the upside....
California’s Attorney General Warns People to Be Wary of Crypto Scams
California authorities recently came out with a fresh cautionary statement on crypto crime. Xavier Becerra, California’s attorney general, recently...
California’s Attorney General Warns People to Be Wary of Crypto Scams
California authorities recently came out with a fresh cautionary statement on crypto crime. Xavier Becerra, California’s attorney general, recently...
German Authorities Confiscate $30 Million in Bitcoin From Pirate Movie Site
German authorities, with the help of the U.S. Federal Bureau of Investigation (FBI), have confiscated about $30 million in...

Featured Crypto News

BTC Averages Over 1 Million Active Addresses as ETH Transaction Fees Hit $2M Daily
Bitcoin averaged over a million daily active addresses in the past week for the first time since January 2018....
Two Macro Calls That Could Propel Bitcoin to $14,000 This Year
Bitcoin may hit $14,000 in the coming quarter. The analogy appears out of two extremely bullish calls made for...
Investors Dollar-Cost Averaging Bitcoin Since 2017 Made a 61.8% Return
Data shows investors who dollar-cost averaged into Bitcoin even since the $20,000 peak are profitable. Researchers at Coin Metrics...
Grayscale Investments’ Ethereum Trust Filed With the SEC to Obtain Reporting Status
The digital currency asset manager Grayscale told investors on Thursday that the firm has publicly filed a Registration Statement...
This Bitcoin Metric Just Dropped 4%—And It’s Bullish For The Market
Bitcoin has rallied by approximately 25% over the past two weeks as Ethereum has wrested the market higher. The...
Bitcoin Price Climbs to $11,200, But Three Factors Hint at a Pullback
The price of Bitcoin spikes to $11,200 but three key factors suggest that a short-term pullback is likely as...