Bitcoin's price is gathering upward momentum as traders buy fewer put options, which are bearish bets on the top cryptocurrency.
At press time, bitcoin was changing hands near $9,400, representing a 2% gain on the day, according to CoinDesk’s Bitcoin Price Index. On a week-to-date basis, the cryptocurrency is now reporting over 8% gains.
Bitcoin’s recent price rise is accompanied by a slide in demand for put options. Such derivative contracts give the holder the right but not the obligation to sell the underlying asset at a predetermined price on or before the predetermined rate. Meanwhile, a call option gives the holder the right to buy,
The one-month put-call skew, which measures the price of puts relative to that of calls, is currently at 6.6%, down from its multi-month high of 22% on May 22, according to data provided by the crypto derivatives research firm Skew.
The metric fell sharply from 15% to 5% on Wednesday as prices rose from $9,000. This confirms a bullish breakout on technical charts. Essentially, the demand for put options, or bearish bets, has dropped as prices rise.
“The decline in skew is related to higher perceived halving risk since mid-May, causing elevated skews," said Luuk Strijers, COO at cryptocurrency derivative exchange Deribit. "Now the market seems to be less worried about further downward moves reducing the demand for puts."
Put options drew greater demand after the May 11 reward halving, pushing the one-month skew higher to 20% from 12%. This was possibly due to fears that the cryptocurrency would witness a price pullback similar to the 30% decline seen in the four weeks following the second halving, which took place on July 9, 2016.
A 9% correction happened last week with prices falling from $9,950 to $8,660. The cryptocurrency defended levels below $8,700 multiple times earlier this week before jumping back above $9,000.
As bitcoin fell from $10,000 to $8,630 in the seven days to May 25, the number of addresses holding at least 100 BTC rose from five-year lows, according to data provided by Glassnode.
“Once again, the big players seem to be accumulating into the dip,” analysts at blockchain intelligence firm Santiment noted in a blogpost.
The number of addresses rose from 16,010 to 16,089 during the price decline, a sign of dip demand and investor belief in the long-term bullish story, The number of addresses holding at least 0.01 BTC and 0.1 BTC also reached record highs during the recent price drop.
Technical charts now indicate a scope for a rally toward resistances lined up near $9,850 and $10,000.
4-hour and daily charts
Bitcoin has invalidated the bearish lower highs pattern on the four-hour chart with a convincing move above $9,310 (horizontal line). With that, the positive view put forward by Wednesday’s falling wedge breakout has gained credence.
The cryptocurrency could rise further to resistance located at $9,875, the upper end of the narrowing price range seen on the daily chart. A close above that level would signal a resumption of the rally from the low of $3,867 observed in March.
Meanwhile, the lower end of the narrowing price range is the level to beat for sellers.
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