Key Takeaways:
- Bitcoin (BTC) has reversed its New Year gains, with inflation-adjusted yields reaching multi-month peaks.
- Options listed on Deribit reflect a robust bullish sentiment.
The start of the year brought optimism for Bitcoin as it briefly neared the $100,000 mark, bouncing back from December's lows. However, data from CoinDesk indicates that, just a week later, BTC retreated to around $93,000, unable to maintain prices above last week's levels.
This decline corresponds with increased market volatility, particularly within the U.S. Treasury, where long-term yields have been rising sharply due to concerning inflation data.
Inflation-adjusted yields are also surging. The yield on 10-year U.S. inflation-indexed securities has increased to 2.29%, the highest since November 2023, as reported by TradingView. This escalation in yields generally diminishes appetites for risk assets like cryptocurrencies, especially when heightened yields stem from aggressive Federal Reserve policy expectations.
"This morning's slide in the spot Bitcoin price appears to be a reaction to increased yields in the Treasury market and a diminished expectation for further rate cuts this year," noted Thomas Erdosi, head of product at CF Benchmarks. Last week, traders adjusted expectations for the Fed's next rate cut to June.
This surge in yields isn't unique to the U.S.; countries like Japan and the UK are witnessing similar trends, with the UK experiencing its highest long-term yields since 1998. This reflects a broader downturn affecting other markets, including significant indices like the Nasdaq and S&P 500, which have also seen a loss of early year gains.
Interestingly, despite these macroeconomic concerns, bullish tendencies are echoing through BTC's options market. The dollar value of active call options on Deribit now stands at $14.87 billion, nearly double that of active puts, according to data from Amberdata. A call option buyer conveys optimism, whereas a put buyer signals skepticism on the market.
Additionally, the $120,000 strike call remains the most favored among traders, boasting a sizable open interest of $1.47 billion. Meanwhile, notable open interests also exist for call options at $101,000 and $110,000, with the most popular put option at $75,000 holding $595 million in open interest.
Overall, options expiring after January are trading at a significant premium to those of puts, indicating a prevailing bullish outlook.
"We may see a shift in market sentiment by this month's end, with potential changes in regulatory landscapes following President Trump's inauguration on January 20," Erdosi added.
