Bitcoin traders are preparing for a potential extended decline in the token’s price, with options data suggesting a bearish outlook in the near term, according to crypto options exchange Deribit.
The volume of Bitcoin put options expiring on March 29 has exceeded call options in the past 24 hours. This shift in the put-to-call ratio, a key indicator of market sentiment, signals that traders are bracing for a potential drop in Bitcoin’s price. The strike prices of these put options are clustered around $50,000 and $45,000 on the platform, while Bitcoin traded at around $63,500 on Friday.
David Lawant, head of research at crypto prime broker FalconX, attributed the market correction to heavy outflows from the Grayscale Bitcoin Trust (GBTC).
“Spot ETF net inflows data as of yesterday showed the second four-day streak of outflows since these products launched on January 11,” Lawant told Bloomberg.
The pullback in Bitcoin’s price contrasts with the recent rally in the stock market, where traders are more optimistic about the Federal Reserve cutting interest rates this year. Bitcoin has dropped over 10% from its all-time high, marking one of the largest retreats this year, as the group of 10 spot Bitcoin ETFs is on track to post the biggest outflow since their launch. Over $218 million in bullish bets were liquidated in the past 24 hours, according to data from Coinglass.
Chris Newhouse, a DeFi analyst at Cumberland Labs, told Bloomberg that while digital assets initially reacted positively to macro tailwinds surrounding the Federal Open Market Committee (FOMC) meeting, a weakening correlation to equities, driven by product-specific outflows and liquidations, seems to have driven Bitcoin and Ethereum lower.
The funding rates for perpetual futures, which indicate the level of leverage in crypto trading, remain relatively low after recent bouts of liquidations. This suggests that the current drop in Bitcoin’s price may not be as sharp as previous pullbacks. However, the high level of leverage in long positions accelerated the slump in Bitcoin on Monday, with over $582 million in long liquidations and a total liquidation of over $738 million.
Despite the current bearish sentiment in the options market and the recent price decline, some analysts remain optimistic about Bitcoin’s long-term prospects. According to a recent report by Bernstein, Bitcoin could be poised for significant gains by the end of the year, with a price target of $90,000.
The analysts also view Bitcoin miners as attractive investments for equity investors, citing factors such as the new Bitcoin bull cycle and strong exchange-traded fund (ETF) inflows.
