Bitcoin price plunge: Bottom seen at $40,000; upside ahead?
Investors searching for clues as to where Bitcoin price is headed next may want to take a look at what the options market is signaling. The world’s largest cryptocurrency rebounded this week after falling below $40,000 for the first time since September on Monday. The drop put holders on edge. For one, it marked a downturn of roughly 40% from the coin’s record high in November. It also served as a test of what is seen by several technical analysts as a key support level: $40,000.
Now Bitcoin price appears to have stabilized, and options activity suggests investors believe the test of $40,000 is over, and more upside is ahead, according to a team from Genesis Global Trading including Noelle Acheson.
The skew, or difference in implied volatility of bullish and bearish bets, has recently dropped from double-digits to near zero, and revealed a decrease in investor demand for put options and an increase for call options, Genesis data show.
“That shift in preference may be bullish for the price of BTC, all else equal,” Acheson added.
A bottom at $40,000 is a view echoed by many analysts in the famously optimistic world of crypto. Martin Gaspar and Katherine Webb at CrossTower said in a Friday note that Bitcoin’s reserve risk, a measure of confidence of long-term BTC holders, is currently lower than it was at the coin’s last bottom in July 2021, and now stands in the “buy” zone, which could give “more weight to the indication that this is a bottom.”
To be sure, Bitcoin remains as volatile as ever and trading could be choppy in an environment where the Federal Reserve is becoming more hawkish, according to Marko Papic, chief strategist at Clocktower Group. Bitcoin’s correlation with the S&P 500 remains at one of its highest
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