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The price of the largest cryptocurrency, Bitcoin (BTC), has reached its highest level since May 2022, surpassing $36,000. As investors wonder what will happen after this striking rise, the delta risk reversal indicator, an important indicator used to predict the direction of price in the options markets, is saying that the price increase in BTC will continue.
Bitcoin’s One-Month 25 Delta Risk Reversal Says “Continued Rise”
According to data tracked by Amberdata, Bitcoin’s one-month 25 delta risk reversal (the volatility difference between put and call options in the most liquid option contract) has surpassed 10%, reaching its highest level since April 2021. In other words, it offers downward protection, leaving behind bullish or buying demand and bearish or selling demands.
With the expectation that at least one spot ETF will be approved in the US, Bitcoin reached its highest level since May 2022 at $36,863 on the Binance exchange. Options market data shows that investors have stopped selling above the spot price of the cryptocurrency, which is a popular strategy to generate additional returns on their assets.
On the other hand, speculators may be buying call options to have leveraged upside risk. Longer-term buy-sell reversals also indicate a trend that BTC will continue to strengthen over two, three, and six months.
A call option gives the buyer the right to buy the underlying asset at a predetermined price on or before a specific date, but it does not impose an obligation. The buyer of a call option is indirectly expecting an increase in the market. A put option, on the other hand, gives the right to sell.
Rally Could Gain Momentum with New Demand Pressure
In recent weeks, investors have been trying to buy call options on Bitcoin, leaving market makers with a significant opportunity to open a substantial net short position above $36,000. With prices surpassing this level, market makers may turn to buying BTC in the spot market to bring their net risks to a market-neutral level, unintentionally causing a rally in price.
According to CoinMarketCap, a crypto data and price platform, Bitcoin is currently trading at $36,603 with a 3.70% increase in the past 24 hours. Data shows that the price of the largest cryptocurrency has increased by 3.72% in the past 7 days and 31.62% in the past 30 days.
