Bitcoin Options Markets ‘Do Not Point to a Bullish Period’ After the Halving: CryptoCompare

Francisco Memoria

Leading cryptoassets data aggregator CryptoCompare shows that the bitcoin options market, to which market participants often look at for indicators of where prices are heading, “do not point to a bullish period” after the cryptocurrency’s halving.

Data shared by CryptoCompare details options market makers are often “considered the most knowledgeable market participants,” and with the mature derivatives market we now have in the crypto space it’s possible to get a clearer picture of the expected price action after the halving, compared to the last halving in 2016.

Using implied volatility, a derived metric which measures the expected volatility of an asset, and is used by traders to gauge the forward-looking sentiment of a market, CryptoCompare looked into the sentiment of bitcoin options market makers.

Higher implied volatility, the firm noted, is associated with higher premiums for options, which means there’s greater demand for the options. It concluded the market is more concerned about a potential price drop, than about a potential upside.

7a5c455f-c35b-4802-99e2-c0e46222c0fb.pngSource: CryptoCompare

The left curve on the chart shows that options sellers at these prices are commanding higher premiums as they believe there’s more downside risk to BTC’s price, while buyers at these prices are also willing to pay a premium to enter the market, expecting more downside movements.

CryptoCompare adds that the options market doesn’t expect the price of bitcoin to rise exponentially after the halving, and is instead concerned about maintaining its level. It’s possible, the firm adds, the chart just points to a risk-averse options market.

It also points out that crypto markets, to a certain degree, tracked equities throughout the financial turmoil seen over the last few months, and as such comparisons made with previous halving cycles “cannot ignore the impact of enormous macro events like the coronavirus crisis.” Per CryptoCompare, the fact that BTC seems to track equities could negate some of the impacts of the halving.

CryptoCompare concludes:

Options markets do not point to a bullish period following the halving, and the impact of Covid-19 and equity market volatility on the Bitcoin price could be a bigger determinant of the price movement than the halving itself.

In its release, CryptoCompare also pointed out that the market is much more developed now and there are more market participants, and reduced selling pressure from miners may play a smaller role in the cryptocurrency’s price movements.

It points out, however, that “simple economics would dictate that if there is a decreasing rate of supply of an asset and demand remains the same or increases, then all things being equal, the price of the asset will go up.”  Some analysts have, in fact, made bullish price predictions for BTC after the halving, with VC and bitcoin bull Tim Draper claiming it will hit $250,000 by 2023.

Featured image via Unsplash.