Bitcoin To Hit $50,000 Mark Soon? Here's What Option Traders Explain

The options traders are placing bets on Bitcoin estimating it to surge up to $50,000 by January. This optimism is fueled by expectations that the Securities and Exchange Commission (SEC) is on the brink of green-lighting exchange-traded funds (ETFs) to directly hold the popular cryptocurrency.

Deribit, the largest crypto options exchange, stated that the $50,000 mark has the highest open interest for call options set to expire on January 26. Calls provide buyers with the right to purchase the underlying asset at a specific price within a designated period.

The last time Bitcoin touched $50,000 was in December 2021, amidst a broader retreat from all-time highs as the Federal Reserve began injecting stimulus during the COVID-19 pandemic. However, the current market sentiment is different, driven by expectations of a Federal Reserve policy pivot and the near-certainty of a Bitcoin ETF.

"The bullish sentiment is thriving," remarked Luuk Strijers, Chief Commercial Officer at Deribit.

Bitcoin has experienced a surge of over 60% since mid-October, coinciding with speculation about the SEC approving ETF applications, particularly from industry giant BlackRock. As of Wednesday, Bitcoin is holding steady at around $44,000.

November witnessed an uptick in combined spot and derivatives trading volume on centralized exchanges, reaching $3.61 trillion, the highest since March, according to CCData. The resurgence of activity is attributed to the anticipation of the SEC's positive stance on ETFs.

Derivatives, including options and futures, continue to dominate crypto trading as one of the few avenues for investors to leverage their bets, especially after the collapse of major crypto lenders in 2022. Cash-settled options and futures contracts offer traders a way to execute strategies without dealing with crypto-specific challenges such as custody.

The crypto market experienced a slump from late March to early October, marked by industry bankruptcies and scandals gradually subsiding. Jaime Baeza, Founder and CEO at AnB Investments, noted, "Volatility has been dropping like a stone for most of the year." The crypto ecosystem witnessed low volatility, reduced volumes, and diminished interest rates.

With the imminent possibility of a Bitcoin ETF and a resurgence of risk-taking in broader financial markets, traders are anticipating renewed interest in crypto. Greg Magadini, Director of Derivatives at Amberdata, highlighted, "We've seen this year that as BTC moves higher, volatility has followed. So a sustained bull market might bring back some more volatility in the short and medium term."

*Inputs from Bloomberg*