Recent analysis by QCP Capital indicates a sharp shift in derivatives market sentimentsignaling that options traders are bracing for further declines in Bitcoin’s value.
Dissecting bearish sentiment
The derivatives market has gone through a remarkable change over the past day, with implied volatility in Bitcoin options declining.
This indicates that traders are more concerned about potential downside risks. According to a note from analysts at QCP Capital, the spread between call and put options has narrowed by three volatility points. QCP Capital noted:
While spot prices remain weak, the options market is painting a different picture. July 26 vols staged an impressive 8 vol rally, with RR down 3 vol, signaling caution to the downside.
This contraction reflects the market’s growing caution as traders brace for potential Bitcoin price declines amid rising selling pressure. Notably, the U.S. government moving Bitcoin to exchanges like Coinbase and MtGox lenders starting to receive their redistributed assets via Kraken are contributing factors.
These moves have injected substantial Bitcoin into the market, potentially further suppressing prices. QCP Capital analysts added:
With the ETH Spot ETF potentially not impacting prices early on, coupled with potential selling pressure from the US government and Mt Gox, prices could remain subdued until momentum builds leading up to the elections.
The positive signal of Bitcoin
Amid the bearish derivatives market sentiment shared by QCP Capital, some other Bitcoin metrics suggest a quite opposite feeling-Optimistic.
According to a CryptoQuant author on the QuickTake platform, there has been a significant increase in Bitcoin withdrawals from Kraken.
This is particularly noteworthy because it comes at a time when Mt.Gox creditors are receiving their funds from the Kraken exchange. The analyst observed:
This could be a positive sign, indicating that they are not selling and are preparing to hold their coins by moving them from the exchange to cold wallets. Although the volume is not high, over 5,000 $BTC ($329,192,018) has been withdrawn in the last 24 hours.
Meanwhile, regardless of the mixed signs of According to both QCP Capital and CryptoQuant analysts, BTC itself still maintains a crucial price mark above $66,000.
While the asset briefly traded as high as $67,073 earlier today, Bitcoin is now redone slightly, trading at $66,705 at the time of writing.
According to prominent crypto analyst RektCapital, BTC has not only been successful so far tested again the main resistance area of the former all-time high (ATH), but the asset now has a chance to “form a new higher high for the first time in months.”
Not only was the retest successful…
But Bitcoin also has a chance to form a new higher high for the first time in months.$BTC #Crypto #Bitcoin https://t.co/2sMk2eekFN pic.twitter.com/wHubSs1a9Q
-Rekt Capital (@rektcapital) July 22, 2024
Featured image created with DALL-E, chart from TradingView