Despite a recent pullback, bitcoin (BTC) remains a popular asset in the options market, with bullish sentiment still strong. After a promising start to the year, with bitcoin approaching $100,000, the cryptocurrency was brought back down to $93,000 after failing to maintain its gains above $100,000. This retreat follows a week of increased volatility in U.S. Treasury yields, which reached multi-month highs due to persistent inflation in the U.S.
Not only are nominal bond yields rising, but real, inflation-adjusted yields are also climbing. The 10-year U.S. inflation-indexed security yield has surged to 2.29%, the highest since November 2023, according to TradingView. When yields from fixed-income products become more attractive in real terms, the demand for risk assets like bitcoin tends to decrease, particularly when the yield increase is driven by expectations of a more hawkish Federal Reserve rather than economic growth.
As inflation data continues to suggest stubbornness, traders are pushing back expectations for a rate cut from the Fed, with June now seen as the likely date for the next move. According to Thomas Erdosi, head of product at CF Benchmarks, the recent decline in bitcoin’s price is tied to rising Treasury yields and reduced expectations for rate cuts this year. As a result, the outlook for crypto assets in the short term has become more cautious, as risk assets generally perform better in more liquid market conditions.
This increase in yields isn’t just a U.S. phenomenon; major economies like Japan and the U.K. are also experiencing similar trends. The U.K. is facing its highest long-end yields since 1998, adding further pressure to global markets, including stocks. Major indices, such as the Nasdaq and S&P 500, have also seen a decline in their New Year gains.
However, despite these macroeconomic challenges, bitcoin’s options market remains optimistic. The value of active calls on the Deribit exchange has reached $14.87 billion, nearly double that of active puts, according to data from Amberdata. Calls are typically bought by those who are bullish on the asset, while puts are bought by those with a bearish outlook.
Notably, the $120,000 strike price is the most popular among call options, with a notional open interest of $1.47 billion. Other strike prices, such as $101,000 and $110,000, also have significant open interest. On the other hand, the most popular put option, at $75,000, has an open interest of $595 million. Calls expiring after January continue to trade at a premium, indicating a strong bullish bias.
Erdosi suggests that the market may experience a shift by the end of the month, especially with the inauguration of President Trump on January 20. The new administration could bring a more favorable regulatory environment for crypto, potentially boosting market sentiment.
