Options Trading Indicates Bullish Outlook for Bitcoin, Despite Drop in Correlation to S&P 500

By 0xK2 03/21/23 1:41 PM

In the latest news from the world of cryptocurrencies, it has been reported that the Options open interest in Bitcoin has just hit a new all-time high of 468,000 Bitcoin, equivalent to roughly $13 billion, according to data by Glassnode. This is the same notional value during the 2021 bull run, which is a significant development for Bitcoin.

For those unfamiliar with options contracts, they give investors the option to buy or sell an underlying asset, in this case, Bitcoin, at a predetermined price and time. The strike price for March 31 shows a huge dominance for calls around $30,000, which is set to place further resistance on the $30,000 mark. This means that traders are betting that Bitcoin will rise above $30,000 in the near future, which is a bullish sign for the cryptocurrency.

In another interesting development, Bitcoin’s correlation to US fairness markets has fallen to its lowest stage in more than a year and a half. That’s according to crypto analytics firm CoinMetrics, who present a chart showing that Bitcoin’s 30-day Pearson correlation between Bitcoin and the S&P 500 has just fallen below 0.20, its lowest level since September 2021.

Correlation Between Bitcoin and US Stocks Reaches Lowest Point in 20 Months

This is a significant reversal from mid-2022 when Bitcoin and shares were largely moving in lockstep, and the 30-day correlation briefly surpassed 0.7. Given the divergence in the Bitcoin price, which has been surging, and the S&P 500, which has been languishing, in the past two weeks, that correlation will likely continue to drop. If it falls below 0.08, it will hit a three-year low.

This development is interesting because it suggests that Bitcoin is becoming less reliant on traditional markets, which is a good sign for its long-term prospects. It also shows that investors are increasingly viewing Bitcoin as a separate asset class, rather than just another stock or commodity.

Conclusion

In conclusion, the Options open interest hitting an all-time high, along with the decreasing correlation between Bitcoin and US fairness markets, is a significant development in the cryptocurrency world. It will be interesting to see how these trends continue to develop and how they will impact the future of Bitcoin and other cryptocurrencies.

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