Options traders on Derive now put the odds of Bitcoin finishing Christmas below $70,000 at 31%, up from 15% a week earlier. K33 separately reports open interest in perpetual futures near 353,000 BTC, up 12% over 30 days, and sees the market set for a squeeze in either direction.
Bitcoin was trading around $73,500 on Wednesday after five consecutive weekly losses. Options traders now price a greater chance of a drop below $70,000 by Christmas than a climb above $80,000.
Derive odds flip in a week
Last Wednesday, Derive put the odds of an $80,000-plus finish at 53%. That has fallen to 26%, according to Derive founder and CEO Nick Forster, while the chance of a sub-$70,000 finish has risen from 15% to 31%.
Forster told The Block that traders are becoming increasingly defensive, with puts costing more than equivalent calls. Bitcoin options trading on Derive totaled $418 million last week, a 37% increase, and puts accounted for 55% of premiums traded, compared with 36% the previous week, he said.
Bitcoin dropped back below $74,000 on Tuesday after October's U.S. consumer price index rose 0.4% against expectations of 0.3%, and futures traders priced in further Fed tightening at the December meeting. That followed more than $1 billion in crypto long liquidations on Monday, as bitcoin fell below its 50-week moving average.
K33 sees room for a squeeze
Meanwhile, perpetual futures open interest stood at around 353,000 BTC on Tuesday, according to K33's latest research report. Open interest has been higher on only 1.2% of trading days over the previous two years.
Over the past 30 days, open interest increased 12% while bitcoin lost 10%, K33 Head of Research Vetle Lunde noted. He said a breakdown could trigger substantial long liquidations, while a recovery could fuel short covering, and described the market as "ripe for a squeeze".
K33 also noted a 0.75 correlation between bitcoin and the Nasdaq over 30 days, in the 99th percentile since 2020. Of 16 previous strong Nasdaq rebounds, nine continued higher, and bitcoin gained in eight of them, with a median return of 2.9% over 20 days, Lunde said. Bitcoin fell in each of the seven failed rebounds, with a median loss of 21% over the following 20 days.
U.S. spot bitcoin ETF funds recorded net outflows of $1.28 billion last week, according to data compiled by The Block, with a further $296 million leaving on Monday and Tuesday. Friday's U.S. producer price index release is next on the economic calendar.
Source: The Block
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