Cryptocurrency market conditions have changed dramatically; According to an analysis by QCP Capital, the options market in its current state makes the cryptocurrency industry look like one big crisis, like the shutdown of cryptocurrency exchange FTX after filing for bankruptcy, which never happened.
Trading desk QCP Capital published observations on the crypto industry, revealing some key points to consider for the coming months.
The crypto market comes back to life
QCP analysis notes that Bitcoin (BTC) risk reversals have been trading in positive territory for the past week, which tells us that calls (buys) have been more expensive than puts (sells) since 2021 in multiple installments.
This is unusual for the sector, as BTC typically has a persistent sell bias, primarily due to mining/treasury hedging activity. The chart below shows this market behavior and the bullish sentiment affecting the options sector.
Source: QCP Capital
Put skew drives the price of put options up and call options down. This difference in price between options is called bias, and under normal circumstances it puts trades with higher volatility than calls precisely because investors are covering some of their bullish positions.
For the trading desk, this means that sentiment in the cryptocurrency market has turned from bearish to bullish, the culmination of what has been happening in the macro market and the slight recovery in the economy.
Bulls could get their hearts broken on Valentine’s Day
The implied volatility (IV) of Ethereum (ETH), which represents the expected volatility of a stock or currency over the life of the option, has fallen, signaling complacency as market prices outweigh fears of a stock collapse. prices, according to the analysis.
Source: QCP Capital
The excitement in the market can be gauged by the amount of “fear of missing out” (FOMO) that has set in, with many prices chasing and the top buying high delta calls and going long the spot market during the last week.
With the upcoming “Big Bad” Federal Open Market Committee (FOMC) meeting, the trading desk expects the market to be more cautious and conservative.
According to QCP, the next potentially problematic date will be February 14, when the next CPI report will be released, which can potentially “break the hearts of bulls.”
For QCP, this is the same scenario that the market experienced in December. Similarly, the price can experience a breakout above characterized by a very sharp and violent move.
Bitcoin is currently trading at $23,200 and seems to be paving the way for the conquest of new levels. It has gained 0.7% in the last 24 hours and 10.3% in the last seven days. Bitcoin is trying to break the next hurdle represented by the $24,400 level.
BTC price with some gains on the daily chart. Source: BTCUSDT Tradingview
Ethereum is trading at $1600, up 0.3% in the last 24 hours, with price action sideways. The next wall of resistance is at $1691, a zone that the bulls have not visited since September 2022. Ethereum has gained 3.8% in the last seven days.
ETH price is moving sideways, with some gains on the daily chart. Source: ETHUSDT Tradingview
Cover image from Unsplash, charts from Tradingview.
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