bitcoin has recently made headlines by surpassing the $100,000 mark for the first time, a milestone that has sparked increased trading activity and strategic hedging among investors.
According to a Bloomberg <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-12-05/bitcoin-options-shows-traders-are-already-hedging-after-record-rally-to-100-000?srnd=phx-markets” target=”_blank” rel=”noopener nofollow”>reportThis rise has led some traders to seek protection against potential price declines, as demand for put options (contracts that allow buyers to sell an asset at a predetermined price) has increased dramatically.
Caution grows with growing interest in put options
Amberdata data reveals that puts with strike prices of $95,000 and $100,000 have seen substantial gains. open interestindicating a strong interest in protecting against a recession. Additionally, there has been a notable increase in demand for puts in the $70,000 to $75,000 range.
Luke Nolan, research associate at CoinShares, noted that much of the open interest is concentrated in late December and January, suggesting that traders are preparing for potential corrections after bitcoin's significant price rise.
While the recent trading activity is indicative of the enthusiasm surrounding bitcoin, open interest for puts remains relatively low compared to call optionswhich give investors the right to buy the asset at specific prices.
This disparity suggests that while traders are cautious, bullish sentiment still prevails in the market. The digital currency has risen roughly 50% since the election, reaching a high of $104,000 before stabilizing around $97,370 late on Thursday.
The funding rate (a measure of the cost of holding leveraged positions) has approached all-time highs, indicating that traders are paying significant premiums to amplify their bullish bets.
Brian Strugats, chief operating officer of FalconX, noted that this increase in the funding rate reflects patterns seen in previous bull markets, where rising funding rates typically accompany strong price movements.
Tether CEO Highlights bitcoin's Role in Financial Freedom
In addition to bitcoin's performance, other sectors of the crypto derivatives market show bullish indicators. Futures contracts significant premiums have been recorded on the CME (Chicago Mercantile Exchange), and options markets on platforms such as Deribit also reflect a positive outlook for the cryptocurrency market.
In particular, short-term call options at strike prices of $100,000 and $110,000 have seen considerable activity, with large trades indicating strong investor interest.
Despite the general optimism, some market analysts warn that high funding rates could signal an imminent pullback, as seen in previous bull runs.
Bohan Jiang, head of OTC options trading at Abra, emphasized that while high funding rates may indicate a overheated marketThey can persist for longer than expected, adding an element of risk.
Paolo Ardoino, CTO of Bitfinex and CEO of Tether (USDT), also highlighted the importance of bitcoin surpassing the $100,000 milestone. Ardoino described it as a reflection of bitcoin's resilience and its growing acceptance as a reliable asset during economic uncertainty.
Ardoino highlighted that bitcoin is not simply a speculative asset but a means of unlocking. financial freedom for communities around the world, providing access to decentralized financial systems across geographic borders. Ardoino further stated:
bitcoin crossing the major $100,000 mark isn't just about “numbers going up.” It is a testament to their resilience and inclusion. As a safety net in most worst-case scenarios, bitcoin continues to work when traditional systems fail. The recent surge in institutional interest has also boosted bitcoin's price, solidifying its position as a reliable asset even in times of economic uncertainty… With current optimism around a more favorable regulatory environment in the US, the Cryptocurrency industry is set for a crucial and transformative year in 2025.
Featured image of DALL-E, chart from TradingView.com
