Bitcoin (BTC), which has been in decline since its initial attempt to reclaim territory lost previously, is now back within its range. However, there are still risks of further losses. While the crypto market has seen weak price movements in 2023, BTC has been more volatile than other digital assets.
Bitcoin trades at $16,800, with sideways movements in the last 24hrs. BTC has made 1% profit in the past seven days. Over the same time, Ethereum (ETH), Cardano ADA (Litecoin) and other coins have experienced gains north of 6% to 12%.
Bitcoin Investors Hedging Their Positions
The Bitcoin spot market is experiencing price stability, so the derivatives industry might offer more insight into price expectations. Recent research has shown that the derivatives sector may provide more clues about price expectations. report Deribit, a crypto exchange, reported that there was less expectation of a surge in volatility due to the new year.
The report claims that market participants have been “hesitant” to jump into the current price action due to ambiguity around macroeconomic conditions. This sentiment was further fuelled by the crisis between Gemini, DCG and Digital Currency Group (DCG).
The DCG is the owner of Genesis, a crypto lender that owes Gemini Earn customers millions of dollars. The price of Bitcoin and other cryptocurrency will trend downward if the first company in the group decides to sell off one of its products to repay their debt. Deribit noted:
The Option market has dismissed any material directional reaction of the Gemini DCG deadline. Additionally, the Skew across Terms does not indicate a strong bias.
Implied Volatility, a measure of the market’s expectation around price movement, has declined. Under the current market environment, the option sector has been selling down; the report shows some buying activity around put (bearish), contracts for February and March.
These contracts could be used as part of a hedge strategy by prominent players who hold Bitcoin spot positions. If DCG and Gemini are resolved favorably, then the market will likely trend upwards.
Deribit also provided additional data that reflects the current market state, which is not governed by a clear direction. Below is the chart that shows how there is a lot Open Interest.
According to this data, market participants are expecting sideways price movement going into January 27th expiry. As previously mentioned, macroeconomic developments as well as the DCG/Gemini status could change this.