Countdown To Bitcoin ETF 2024 Decision: Traders Utilize Hedging Tactics, Bloomberg Reveals
As the highly anticipated deadline for a positive or negative determination on spot Bitcoin ETF applications approaches, Bloomberg has revealed that the BTC options market is witnessing an uptick in hedging activity as traders brace themselves for a pivotal decision on January 10th.
According to the report, there has been a surge in open interest for put options expiring on January 12, indicating that market participants are taking precautionary measures to mitigate potential losses in the event of an unfavorable verdict by the US Securities and Exchange Commission (SEC) concerning these index funds containing the cryptocurrency.
The Bloomberg report highlights that the open interest for put options, which allow holders to sell Bitcoin, has significantly increased for contracts set to expire on January 12.
This surge in open interest has led to a higher put-to-call ratio for these specific options compared to contracts with later expiration dates beyond the January 10 deadline.
The chart below illustrates the most notable strike prices for the put contracts, namely $44,000, $42,000, and $40,000. These figures suggest that put holders may exercise their options to minimize losses in case of negative market sentiment surrounding the SEC decision.
The put-to-call ratio, seen as a gauge of overall market sentiment, stands at 0.67 for the January 12 options contracts, indicating a more cautious approach among traders.
Ryan Kim, head of derivatives at FalconX, suggests that leveraged and speculative traders are utilizing Bitcoin put options to safeguard their leveraged long positions while anticipating significant price fluctuations in either direction.
The higher put-to-call ratio for January 12 options further reflects the market’s preference for protection against a potential unfavorable decision.
The surge in open interest for put options set to expire on January 12 indicates a growing need for security if an unfavorable ruling is reached. Although Bitcoin’s impressive rally has mitigated the impact of its decline in 2022, market expectations for ETF approval may already be priced in, posing potential risks for the market.
BTC’s Price Resistance And Potential Decline
Bitcoin has witnessed a remarkable surge this year, with expectations of ETF approval contributing to a price increase of over 60% since mid-October.
However, the Bloomberg report suggests that the surge in demand for anticipated ETFs may already be factored into the token’s price, potentially exposing the market to a “sell the news” scenario in the second week of January.
Furthermore, QCP Capital, a Singapore-based crypto asset trading firm, predicts resistance for Bitcoin in the range of $45,000 to $48,500, with a possible retracement to $36,000 levels before the uptrend resumes.
Currently, Bitcoin is trading at $43,400, experiencing a 1% decline over the past 24 hours. In the last 14 days, the cryptocurrency has shown sideways price movement with a slight decrease of 0.4%.
Given Bitcoin’s well-known volatility, it remains uncertain how the market will respond as the impending decision and potential catalysts draw near, and how these factors will impact its price dynamics.
However, it’s important to note that the upcoming decision is not the sole catalyst that could drive Bitcoin’s price in 2024. The cryptocurrency is also anticipated to experience a significant event in April 2024, known as the halving event.
Historically, this event has resulted in an upward surge in Bitcoin’s price, and it is predicted to propel the cryptocurrency beyond its previous all-time high (ATH) of $69,000 throughout the upcoming year.
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