First Mover: Bitcoin's Put-Call Ratio Hits 9-Month High, But That's Not Necessarily Bearish

March 12, 2021

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By the CoinDesk Markets Team

Edited by Lawrence Lewitinn

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Bitcoin (BTC)

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(Price data as of Mar. 12 @12:20 UTC)

Good morning. Here's what we're writing about:

Check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Lawrence Lewitinn and Emily Parker, at 9 a.m. U.S. Eastern time. Today the show will feature guests:

MARKET MOVES by OMKAR GODBOLE

Bitcoin's Put-Call Ratio Hits 9-Month High, But That's Not Necessarily Bearish

Bitcoin is currently trading near $56,395, having narrowly missed challenging the record high of $58,332 on Thursday, according to CoinDesk's Bitcoin Price Index. The pullback seen today could be associated with the jittery traditional markets. The U.S. 10-year yield has risen back to 1.6%, strengthening the dollar and pushing the European equities lower.

Bitcoin prices, Mar. 11 to Mar. 12, 2021 (CoinDesk)

Bitcoin's put-call open interest ratio, which measures the number of put options, or bearish bets, open relative to calls, or bullish bets, is rising. However, that does not imply traders are positioning themselves for a drop in the market.

The ratio jumped to 0.91 on Thursday, the highest level since June 26, 2020, according to data provided by the crypto derivatives research firm Skew.

Bitcoin put-call open interest ratio (Source: Skew)

The metric has been rising since the beginning of the year. The spike, however, may have been fueled by increased put selling, which is usually done when the market is expected to consolidate or rally.

Bitcoin's one-month implied volatility, or investors' expectations for price turbulence over four weeks, spiked to record levels in early January, boosting options prices and remained elevated above its lifetime average of 100% (annualized) until last week.

Traders, therefore, had a strong incentive to sell put options at high prices during that bull run. Volatility essentially represents uncertainty and has positive impact on options prices. The one-month implied volatility is now hovering below 100%.

Open interest only tells us the number of calls and put contracts that are active, or open, at a given point in time and does not reveal whether investors are buying call/put options or selling (known as “writing” in options markets).

The way the options are currently priced actually suggests bullish bias in the market. One-, three- and six-month put-call skews, which measure the cost of puts relative to calls, are hovering in negative territory, implying greater demand for bullish calls compared to puts.

Indeed, the put-call skews have recovered from the bull market depths seen earlier this year and options market recently saw some put buying. Again that does not imply a bearish mood, as traders often buy put options as a hedge (protection) against bullish or long positioning in the spot or futures.

Lastly, the put-call open interest ratio is closing on parity, which means the market is heading toward neutral positioning. All-in-all, the spike in the put-call open interest ratio shouldn't be a cause for concern for the bulls. However, a continued rise in the U.S. 10-year Treasury yield may play spoilsport.

The yield has risen back to 1.6% today, making the U.S. dollar more attractive as an investment and putting a downward pressure on equities and other competing investments. Bitcoin fell sharply in the last week of February, as yields spiked, triggering risk aversion in traditional markets.

--Omkar Godbole

Read the original story here:
Bitcoin's Put-Call Ratio Hits 9-Month High, But That's Not Necessarily Bearish

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TECHNICIAN'S TAKE by DAMANICK DANTES

Bitcoin (BTC) is holding support above its 50-day volume weighted moving average, but the cryptocurrency faces resistance around $58,000. Upside momentum is slowing, with initial support around $52,000 on the 4-hour chart.

4-hour price chart shows resistance around $58,000 with lower support around the 50-period volume weighted moving average (Source: TradingView)

--Damanick Dantes

Original story found here:

Bitcoin Battles Resistance Near All-Time-High as Possible ‘Double Top’ Looms: Technical Analysis

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Losers:

The CoinDesk 20 filters from the larger universe of thousands of cryptocurrencies and digital assets to define a core group of 20. These assets constitute roughly 99% of the market by volume at eight of the largest and most trustworthy exchanges.

BOLO

Be on the lookout for these events today:

ICYMI

In case you missed it, here is yesterday's episode of First Mover:

Changpeng "CZ" Zhao, CEO of Binance, the world's largest crypto exchange, discusses big developments in crypto markets and his latest move into DeFi. U.S. Representative Warren Davidson (R-Ohio) on his and other lawmakers' proposals for clearer crypto regulations. Plus the latest from Singapore-based Diginex after going public with a crypto exchange in the U.S.

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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