Does the Crypto Market Have The Strength To Break To The Upside? QCP Capital Weighs In

The
conditions
of
the
cryptocurrency
market
have
changed
drastically;
according
to
an
analysis
by
QCP
Capital,
the
options
market
in
its
current
state
makes
the
crypto
industry
look
like
a
major
crisis,
such
as
the
shutdown
of
crypto
exchange
FTX
after
filing
for
bankruptcy,
never
happened.

Trading
desk
QCP
Capital

published
observations
on
the
crypto
industry,
revealing
some
key
points
to
consider
for
the
coming
months.

The
Crypto
Market
Comes
Back
To
Life

QCP’s
analysis
points
out
that
Bitcoin
(BTC)
risk
reversals
have
been
trading
in
positive
territory
over
the
past
week,
which
tells
us
that
calls
(buys)
have
been
more
expensive
than
puts
(sells)
since
2021
across
multiple
tenors.

This
is
unusual
for
the
sector
as
BTC
typically
has
a
persistent
put
skew,
mainly
due
to
miner/treasury
hedging
activity.
The
chart
below
depicts
this
market
behavior
and
the
bullish
sentiment
impacting
the
options
sector.

Put
skew
drives
the
price
of
puts
higher
and
calls
lower.
This
difference
in
pricing
between
options
is
called
skew
and,
under
normal
circumstances,
puts
trade
with
higher
volatility
than
calls
precisely
because
investors
are
hedging
some
of
their
bullish
positions.

For
the
trading
desk,
this
means
that
the
sentiment
in
the
cryptocurrency
market
has
shifted
from
bearish
to
bullish,
a
culmination
of
what
has
been
happening
in
the
macro
market
and
the
slight
recovery
in
the
economy.

Bulls
Might
Get
Their
Hearts
Broken
On
Valentines
Day

Ethereum’s
(ETH)
implied
volatility
(IV),
which
represents
the
expected
volatility
of
a
stock
or
currency
over
the
option’s
life,
has
fallen,
indicating
complacency
as
the
market
prices
out
fears
of
a
price
collapse,
according
to
the
analysis.

The
enthusiasm
in
the
market
can
be
measured
by
the
amount
of
“fear
of
missing
out”
(FOMO)
that
has
set
in,
with
many
chasing
prices
and
the
top
by
buying
high
delta
calls
and
going
long
in
the
spot
market
over
the
past
week.

With
the
upcoming
“Big
Bad”
Federal
Open
Market
Committee
(FOMC)
meeting,
the
trading
desk
expects
the
market
to
be
more
cautious
and
conservative.

According
to
QCP,
the
following
potentially
problematic
date
will
be
February
14th,
when
the
following
CPI
report
will
occur,
which
can
potentially
“break
the
heart
of
the
bulls.”

For
QCP,
this
is
the
same
scenario
the
market
experienced
in
December.
Similarly,
the
price
may
experience
a
topside
breakout
characterized
by
a
highly
sharp
and
violent
movement.

Bitcoin
is
currently
trading
at
$23,200
and
seems
to
be
paving
the
way
for
the
conquest
of
new
levels.
It
has
gained
0.7%
in
the
last
24
hours
and
10.3%
in
the
last
seven
days.
Bitcoin
is
trying
to
break
the
next
obstacle
represented
by
the
$24,400
level.

Ethereum
is
trading
at
$1600,
up
0.3%
in
the
last
24
hours,
with
sideways
price
action.
The
next
resistance
wall
is
at
$1,691,
a
zone
the
bulls
have
not
visited
since
September
2022.
Ethereum
has
gained
3.8%
in
the
last
seven
days.

Cover
image
from
Unsplash,
charts
from
Tradingview.