Last night, the US announced higher-than-expected consumer price index (CPI) data, indicating that inflation remains highly persistent, reducing market expectations for the Federal Reserve (Fed) to cut interest rates, causing the crypto market to plummet for a time, with Bitcoin dropping to $94,000.
However, with the Fed Chair Powell's moderate remarks, stating "we won't overreact to a couple of bad data points," combined with Trump's call for lower interest rates and reports of Russian President Putin agreeing to ceasefire negotiations, Bitcoin quickly rebounded.
Further Reading: US CPI Exceeds Expectations, Trump Calls for Rate Cuts, Putin Agrees to Ceasefire Talks, Bitcoin Rebounds Above $98,000
Bitcoin Rebounds After Dropping to $94,000
According to data from the Binance spot market, Bitcoin broke through $98,000 at 6:30 am today, reaching a high of $98,120, rebounding 4.29% from the previous night's low, recovering the 24-hour decline and rising 2.3%.
Options Market Expects Lower BTC Volatility in the Future
Looking at the options market data, Adam, the overall researcher at Greeks.live, pointed out that the market currently has relatively low expectations for significant price fluctuations in Bitcoin in the future.
- Implied Volatility (IV) - a key indicator in the options market for measuring future price volatility, is now at a low point for the past year. IV is determined by market pricing, and when IV is low, it indicates that market participants generally believe future price movements will not be too drastic.
- Dynamic Volatility (Dvol) - reflecting the actual market volatility, has only been lower than the current level 14% of the time in the past year, indicating that the market's concerns about violent fluctuations are relatively low.
- Shorter-term volatility expectations are even lower - the IV of options expiring this month is only 46%, also suggesting that the market believes Bitcoin prices are unlikely to see significant upward or downward movements in the short term.
Whales Continue to Sell Call Options, No Longer Betting on a BTC Surge
Adam further explained that this is mainly related to the weakening of bullish momentum, as large traders have been continuously selling a large number of call options recently, indicating that they do not believe Bitcoin will see a significant short-term surge.
Since the end of last month's options expiration, the Skew indicator (call option vs. put option premium) across different maturities has continued to decline and is now oscillating around the zero axis, indicating that the market's optimism towards Bitcoin is waning.
Note: Skew = Call IV - Put IV, if Skew is positive, it means the market has higher demand for call options; if Skew is negative, it means the market has higher demand for hedging (buying put options).
Regarding short-term trading strategies, Adam pointed out:
The market is currently in the process of digesting the "Trump trade" junk time, so following the whales to sell options seems to be a better choice.
This is because the market's expectations for violent short-term fluctuations are relatively low, allowing for stable collection of option premiums, and selling call options is more in line with the current market trend, as the bullish sentiment has clearly weakened.
