Bitcoin (BTC) has returned to its range after a failed attempt to regain previously lost territory, with the likelihood of seeing further losses. The crypto market has seen weak price action in 2023, but BTC has been noticeably more fragile than other digital assets.
As of this writing, Bitcoin is trading at $16,800 with sideways movement in the last 24 hours. In the previous seven days, BTC records 1% gains. Over the same period, Ethereum (ETH), Cardano (ADA), Litecoin (LTC) and others have seen gains of over 6% and 12%.
The BTC price is moving sideways on the daily chart. Source: BTCUSDT Tradingview
Do Bitcoin Investors Hedge Their Positions?
As the price stalls out in the Bitcoin spot market, the derivatives sector could provide more clues on price expectations. According to a recent report From the Deribit crypto exchange, expectations of an increase in volatility due to the New Year subsided.
The report claims that market participants have been “hesitant” to jump into current price action due to ambiguity surrounding macroeconomic conditions. Furthermore, the crisis between Gemini and Digital Currency Group (DCG) has added fuel to this sentiment.
The DCG owns crypto lender Genesis, which owes Gemini Earn clients billions of dollars. If the first of these companies decides to liquidate one of its products to pay off its debt, it is likely that the price of Bitcoin and other cryptocurrencies will tend to fall. Deribit noted:
The options market is ruling out a material directional reaction to the Gemini-DCG deadline, and the relatively flat bias between terms does not indicate strong bias.
Implied volatility, a measure of market expectation around price movement, has declined. The options sector has been selling in the current environment; the report points to some buying action around the sell (bearish) contracts for February and March.
These contracts could be part of a prominent player hedging strategy with Bitcoin spot positions. If the situation around DCG and Gemini resolves favorably, the market is likely to be in an uptrend.
The additional data provided by Deribit reflects the current state of the market, which is not dominated by a clear direction. As seen in the chart below, there is a lot of open interest, predominantly call option, around $17,000.
Options expire January 27 with high open interest at $17,000. Source: Debit
These data suggest that market participants expect sideways price action through the January 27 expiration. As mentioned, the DCG/Gemini situation and macroeconomic developments could change this situation.
This post Bitcoin Rally loses strength, uncertainty to dominate the price?
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