Is Bitcoin Wobbly?

As Bitcoin (BTC) price struggles to gain ground above $90,000, cryptocurrency-related developments in the options market listed on Deribit are reminiscent of patterns that heralded the recent price decline in Trump media stocks.

The model referred to here is an implied probability distribution that represents markets’ expectations of the future price of the underlying asset derived from option prices at different strike prices and maturity dates. The model shows the probabilities investors assign to the asset reaching different price levels.

According to data tracked by crypto finance platform BloFin, the implied probability distribution shows a shift to the left, indicating that market participants see a higher probability of BTC trading at lower prices after this level.

Griffin Ardern, head of options trading and research at crypto finance platform BloFin, notes that a similar leftward shift has been seen in the DJT options market, which heralds the recent price decline. The share price has fallen by half in just over two weeks, falling to $27, according to charting platform TradingView. DJT rose to $54 in late October as markets priced in a possible victory for Republican candidate Donald Trump in the US elections held on November 5.

Crypto pro Trump prevailed, defying expectations, and BTC has since surged by over $20,000, reaching $93,000 at one point.

According to CoinDesk data, the cryptocurrency is currently trading at $89,400.

Hawkish comments from Fed officials support the case for a price pullback suggested by the implied volatility distribution. Chairman Jerome Powell said yesterday that the economy is not giving any signals that we should rush to lower interest rates. The Fed, which has reduced the interest rate by 75 basis points since September, was giving bullish signals for risk assets.

However, most market participants continue to place bets beyond the $100,000 barrier.