Bitcoin (BTC) options traders are positioning themselves for a scenario of new all-time high prices for the digital currency in short order.
In a breakthrough in demand today, the price of bitcoin today surpassed $72,000 (USD), a value not seen in four and a half months. With this, the currency is less than $2,000 from its all-time high.
Meanwhile, on the Deribit exchange, The majority of purchase options that expire this Thursday, October 31, are for a price of USD 77,000.
The arrival at this point exceeds the price of most call options expiring tomorrow on Deribit, one of the main exchanges for these instruments. This means that its holders could take advantage of such instruments to acquire the currency at a cheaper value than the current one.
However, a broader look at the outlook reflects that traders of such instruments are preparing for turbulence in the market. The majority of bitcoin purchase options that expire this Thursday, October 31, are for a price of USD 77,000. This shows that they are preparing for new all-time highs before the end of the month.
Meanwhile, in upcoming maturities, purchase options for a price of USD 70,000 predominate. This is a trend that changes by the end of November, when most of it is worth USD 80,000, a sum that increases to USD 100,000 by the end of the year.
On the whole, The majority of bitcoin purchase options open on all remaining expiration dates are for a price of USD 80,000. This, which can be seen in the following graph, makes up an invested value of more than USD 1.2 billion.
These positions demonstrate bullish sentiment for the remainder of 2024, with expectations of new all-time high prices in the near future. Therefore, they could reinforce expectations of optimism in the general market.
It should also be noted that this happens while bitcoin buying open interest is equivalent to twice selling. This type of imbalance indicates traders’ preference for acquiring the currency over taking profits, reflecting their bullish conviction for price continuity.
Why are bitcoin traders bullish?
Next week, two events will take place that are driving bitcoin purchase options towards new maximum prices: the presidential elections in the United States and a possible reduction in interest rates by the Federal Reserve (Fed), the country’s central bank. .
On the one hand, on November 5, the elections will take place that will define the government of the economic power for the next four years. The candidates of the two main parties have expressed their intention to support the growth of the digital asset industry.
This advances a friendlier regulatory environment for the cryptocurrency ecosystem, which has suffered from slowdowns in its development. Above all, this scenario is visualized in the event of a victory in the elections of the Republican candidate, Donald Trump, because he has focused part of his political campaign on supporting the industry.
“A Republican victory is widely considered bullish for risk assets like bitcoin,” comment Bitfinex, cryptocurrency exchange. This is reflected in the correlation of the upward price trend and the increasing probability of a Trump victory, according to the Polymarket bets shown below.
“Anticipation surrounding the elections has driven an increase in options activity,” the exchange notes. Furthermore, it stands out that this takes place in the fourth quarter in a halving year, a period that has historically led to increases in the price, as the following graph shows.
Historically, each bitcoin halving, an event that halves its issuance every four years, has functioned as a catalyst for the price in the following months. The reason for this is that new supply decreases, which facilitates the price increase, something that attracts new investors. Its editions were in 2024, 2020, 2016 and 2012.
“The convergence between election uncertainty, the ‘Trump trading’ narrative, and favorable Q4 seasonality create a perfect storm for bitcoin, promising an exciting period ahead regardless of noisy price movements heading into the election.”
Bitfinex, cryptoasset trading platform
According to investor Scott Melker, Elections shaping up to be perhaps the most crucial event for cryptocurrencies yet. This is stated in his most recent report sent by email to his followers, which CriptoNoticias accessed.
“With a pro-crypto president who delivers, we could see a revolutionized SEC, widespread approval of crypto asset ETFs, a potential national reserve of bitcoin, a commitment not to sell bitcoin into US hands, the abandonment of lawsuits/investigations key, clear legislative guidelines, the return of offshore companies, the cessation of CBDC initiatives and the end of Operation Choke Point 2.0”
Scott Melker, investor.
On the other hand, the Fed’s decision on interest rates will be presented on November 7. According to the expectations surveyed by CME, 95% foresee a cut of 25 basis points to remain at 450-475 basis points, as seen below.
It would be the Fed’s second rate cut after having made the first in August for the first time since the pandemic. Consequently, this continuation of the reduction cycle would increase the liquidity available in the economy for the markets.
Historically, interest rate cuts, measures made to boost the economy, have contributed to the rise of financial markets. In fact, without going any further, the main stocks listed in the United States are at all-time high prices.
Therefore, as long as there are no headwinds, the macroeconomic and political scenario is developing optimistically for the bitcoin market.
Why are bitcoin purchase options purchased at more expensive prices than the current one?
In the futures market, Traders purchase bitcoin call options at higher than current prices for various strategic reasons.. Although it may seem more convenient to buy the digital currency directly, such instruments allow them to expose themselves to potential price increases with a lower risk and initial cost.
To obtain a call option, the trader only pays a premiumwhich represents a fraction of the total price of bitcoin. That gives you the right to buy the asset up to a defined future date at a certain price without being obligated to do so. If the price does not rise as expected, the loss is limited to that premium, thus avoiding larger losses.
In addition, bitcoin is a very volatile asset, a characteristic that tends to become unnerved at times of important events, such as elections or changes in interest rates. Call options at higher prices allow you to profit if the BTC price reaches or exceeds those levels, generating profits with a relatively low initial investment.
This activity also facilitates the possibility of leveraging, since it does not commit as much capital as buying bitcoin directly would require. By simply paying the premium, traders can access positions with the potential for greater profits if the price exceeds the strike price set on the option.
Likewise, options offer the possibility of hedging or protecting other positions. For example, if a trader already owns bitcoin and fears a possible drop in price, he or she can use call options at higher prices as a hedging strategy to ensure a profit if the asset’s price rises.
Although purchasing bitcoin directly may make sense in the face of solid bullish projections, Call options provide a more flexible way to manage risk, benefit from volatility and optimize invested capital.
Although, of course, this type of commerce requires a high degree of knowledge in this regard. Those who access these instruments are experienced traders who usually put together complex investment strategies.
Clarification: This article is written for informational purposes. It does not constitute financial advice or investment recommendation.