Cryptocurrency Derivatives Series: Bitcoin Reclaims $7k But Put/Call Ratio Signals Rallies Unlikely To Prolong

Bitcoin (BTCUSD at Coinbase) price has been stabilized and regained the buying sentiments amid the struggle of the financial markets due to pandemic outbreak. The price of bitcoin has now reclaimed $7,000 levels.

Technically, the minor trend of this pair takes-off well above 7-DMAs upon hammer pattern occurrence at $5,037.61 levels. 

On the contrary, shooting stars has popped up at $6,804.52 levels to signal the exhaustiveness in the bulls’ rallies.

Consequently, the bullish streaks have taken a halt at the stiff resistance of $7,312 levels, For now, extension of rallies upto the next stiff resistance seem to be likely as both leading and lagging oscillators are also in line with the prevailing uptrend.

Hence, the current price is trading at $7,070 levels while participating in prevailing buying sentiments.

However, the put-call ratio has risen to 1.53 on April 06th, that indicates obligations of selling of underlying security (i.e. bitcoin) significantly outpaced those with buying obligations (refer 1st chart). This has seen a considerable pick up with the underlying price (BTCUSD) is stabilizing, inching higher and began oscillating between $7k - $5k levels (refer 2nd chart).

Usually, Put/Call ratio of above 1 indicates there are more number of put buyers than calls and this has been perceived as a bearish indicator. The Put/Call ratio for Bitcoin Options is smack in the middle of that range suggesting that traders are poised for a price reversal.

The put/call ratio has been a conducive tool and effective measures of underlying market sentiment for the forecasting future market trend. The put-call ratio emphasizes the difference in trading volume between puts and calls. 

Well, such options market sentiment signals a bearish sentiment. The ratio is calculated by dividing the number of traded put options by the number of traded call options.

As the case of increase in put options trading currently indicates that the investors are projecting the market to plummet or are beginning to hedge their portfolios in case of a sell-off.

Contemplating all the above factors (both technical and option analytics), we could foresee the price is most likely to oscillate between the range of $5k and $7k levels. Hence, it is between trade BTC with boundary options for some time.