As the January 10th deadline for a decision on spot Bitcoin ETF applications draws near, Bloomberg reports a surge in hedging activity in the BTC options market, indicating market participants are preparing for the outcome.
The increase in open interest for put options expiring on January 12 suggests traders are taking steps to mitigate potential losses in the event of a negative verdict by the US Securities and Exchange Commission (SEC) regarding these index funds holding the cryptocurrency.
Market participants are bracing for the Bitcoin ETF verdict by increasing the open interest for put options, allowing holders to sell Bitcoin. The surge in open interest has resulted in a higher put-to-call ratio for these specific options, signifying a more cautious approach among traders as they anticipate potential market reaction to the SEC decision.
The most prominent strike prices for the put contracts are $44,000, $42,000, and $40,000, reflecting the potential exercise of options to minimize losses in case of a negative market reaction. The higher put-to-call ratio for January 12 options further reflects the market’s desire for protection against a potential negative decision.
While Bitcoin’s rally has softened the impact of its 2022 decline, market expectations for ETF approval may already be priced in, posing potential risks for the market. QCP Capital predicts topside resistance for Bitcoin in the range of $45,000 to $48,500 and a possible retracement to $36,000 levels before the uptrend resumes.
Bitcoin’s current price resistance and potential dip, as well as its anticipated halving event in April 2024, are factors contributing to market uncertainty. Traders are advised to conduct thorough research before making any investment decisions, given the inherent risks in investing in the cryptocurrency market.
