February 13, 2024 at 10:57 GMTModified date: February 13, 2024 at 10:57 GMT
February 13, 2024 at 10:57 GMT

Bitcoin surges above $50k, as call options target $70k 

After crashing in January following the ETF approvals, Bitcoin has regained momentum and is the highest it has been since 2021.

Bitcoin surges above $50k, as call options target $70k 

Bitcoin’s ($BTC) price has surged over the $50,000 threshold for the first time in two years. It follows a brief downturn after the launch of spot Exchange-Traded Funds (ETFs) on 11 January.

Despite the billions of dollars flowing into the newly launched ETFs during their initial weeks, a significant amount of attention had been diverted towards the substantial withdrawals from the Grayscale Bitcoin Trust (GBTC). 

In the aftermath of the ETF launches, Bitcoin’s value plummeted to a low of $38,500. However, the trend appears to be reversing, with diminishing outflows from GBTC and a steady influx of investments into the new ETF products. 

On 8 February, while Grayscale parted with merely 1,850 bitcoins, the combined holdings of the nine other ETFs increased by nearly 11,000 tokens. This was followed by an addition of more than 13,000 bitcoins across these ETFs on 9 February, contrasted with a loss of 2,252 coins for Grayscale. 

This movement is particularly significant considering the daily addition of just 900 newly mined bitcoins to the market, a figure set to reduce to 450 per day with the upcoming Bitcoin halving in April. These spot ETFs are now scooping up 10 times more than what Bitcoin miners were able to produce.

Analysts forecast a bullish outlook for Bitcoin

A recent report from Bitfinex highlighted the current optimistic sentiment surrounding Bitcoin. 

“These inflows coupled with the impending 2024 bitcoin halving and the sustained high levels of illiquid supply, with more than 70% of bitcoin in the hands of long-term holders, paint an exceptionally bullish picture for BTC price movements,” analysts said.

While there was an anticipated “sell the news” dip following the approval of several spot Bitcoin ETFs in January, the market reaction was milder than expected.

“BTC did not reach the expected lows. Realized price metrics across diverse investor cohorts continue to indicate that we are still in the early stages of a bull market. These indicators suggest that the long-term trajectory for the year should see prices trending upwards,” the Bitfinex analysts added.

Interest drives in Bitcoin call options

The growing Optimism in the Bitcoin market has been reflected in call options activity. These financial instruments, which grant the buyer the right to purchase Bitcoin at a predetermined price before a specific date, have been increasingly sought after. This is particularly true for calls with strike prices approaching Bitcoin’s record high of $69,000.

Data from Deribit, a crypto options platform, revealed a significant uptick in the purchase of call options at $65,000, $70,000, and $75,000 strike prices over a recent weekend. Such trading behaviour was previously observed late in 2023, where a flurry of activity in OTM calls at $30,000 and $40,000 was followed by a substantial rally in Bitcoin’s price.

This trend in options trading, along with the influx of funds into both new and existing Bitcoin investment vehicles and the broader market dynamics, points to a sustained positive sentiment in the cryptocurrency market.