Bitcoin Tops $35K, Hitting 16-Month High; Options Positioning Suggests Price Has Further to Run

Bitcoin (BTC) surged past $35,000 Monday, hitting the highest price since May 2022, as cryptocurrency markets continued their October bull run amid optimism that a BTC ETF will get approved in the U.S.

Bitcoin was recently up more than 11% in the past 24 hours to $33,316, pulling back from the peak of its surge but still up dramatically.

There's been a swell of optimism in recent days that the U.S. will get bitcoin ETFs, fueled by a recent court ruling in favor of Grayscale that boosted odds the biggest bitcoin trust, its GBTC product, can be converted into one. And BlackRock's application to list one took a semi-step forward when its proposed product showed up on a Depository Trust & Clearing Corp. website with an assigned unique ID number – something that doesn't mean its ETF was approved but a step some interpreted as a sign the company is confident it will win.

Chainlink's (LINK), Polkadot's native token (DOT) and Polygon's (MATIC) were among the best performing large-cap digital assets with 6%-10% advances. Ether (ETH) andRipple-related token (XRP) posted 2%-3% gains.

The U.S. stock market erased early Monday losses to finish mixed as the 10-year Treasury yield turned sharply lower after hitting 5% for the first time in 16 years earlier in the session.

The CoinDesk Bitcoin Trend Indicator [BTI], which measures the directional momentum and strength in bitcoin's price action, switched to "significant uptrend" as BTC strengthened its footing above the $30,000 level, Todd Groth, head of research at CoinDesk Indices, noted.

"BTC, ETH and the CoinDesk Market Index (CMI) all up week over week while decoupling from tech stocks $QQQ and rising long dated yields," tweeted Groth.

Alex Thorn, research head at digital asset investment firm Galaxy, said that the uptrend could accelerate further due to option dealers' need to buy bitcoin on the spot market to hedge their positions above the $30,000 price level.

"At its peak around $32,500, almost $20 million of BTC will need to be purchased by options dealers for every 1% move up to stay delta neutral," Thorn said in a market report. "The positioning implies that market makers need to buy back increasing amounts of delta as spot moves higher, which should add to the explosiveness of any move in the short term."

However, activity on the Bitcoin blockchain presents a more pessimistic outlook, ByteTree analysts noted in a Monday report. Transaction numbers dropped 50% in a month, and the Bitcoin network's economic throughput was also in a downtrend, ByteTree's Shehriyar Ali and Seran Dalvi pointed out.

"This means that the price is driven solely by the anticipation of positive news, which is not necessarily healthy for the short term," they said.

The $26,750-$28,250 area would act as a support zone for the BTC's price, Galaxy's Thorn added.

"If spot moves lower into this range, dealers will also need to buy BTC to stay delta neutral, which should provide additional spot price support if we move lower into that range," he explained.

Oliver Knight contributed reporting.