Analysis: Crypto options market signals reinforce a cautious stance; $75,000 is a key turning point for Bitcoin.
PANews reported on February 4th that Singapore-based crypto investment firm QCP Capital analyzed the market, noting that Bitcoin briefly fell to around $72,900, its lowest point since the post-US election rally, before rebounding after the US House of Representatives passed a $1.2 trillion appropriations bill ending the partial government shutdown. On the macro front, the risk of a government shutdown has eased, but the Department of Homeland Security's funding has only been extended to February 13th, leaving the risk of a new deadline. Furthermore, oil prices regained a geopolitical premium after the US shot down an Iranian drone approaching an aircraft carrier in the Arabian Sea, but diplomatic news limited gains. The nomination of the Federal Reserve Chair has reignited policy reaction risks; if the market begins pricing in larger rate cuts this year, it could provide marginal support for risk assets and weaken the dollar. However, investors are also watching the pace of balance sheet contraction; shortages in key areas of reserves could trigger market pressure.
Signals from the options market reinforced a cautious stance. Despite a rebound in spot prices, implied volatility remains high, at-the-money option volatility remains high, and the term structure is trending towards a slight inversion, indicating that the market is still paying a premium for the risk of recent gaps. The bearish skew has steepened sharply, and butterfly spreads remain expensive, showing a concentrated demand for convexity from a sharp drop. From a tactical perspective, $75,000 is a key turning point. If it can stabilize at this level, and funding rates return to normal as positions are repositioned, this level seems like a reasonable place to increase exposure. Once it breaks below this level, market sentiment could quickly shift to defensiveness.
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