In the financial markets, traders constantly read between the lines in order to predict what will happen next. When a rising market does not respond positively to positive news, traders take this as a sign that the trend is about to reverse lower.

It’s not always true. Bitcoin’s option market shows that traders are confident in Bitcoin’s future price despite the recent choppy trading following Wednesday’s lower-than-expected U.S. Consumer Price Inflation data. This resulted in a weaker case for Fed tightening, and powered risk assets to rise.

Amberdata, a data source, reports that on Deribit, the leading crypto options exchange the call-put skews remain positive in all timeframes. This indicates a bullish bias.

Call options give the buyer the right to purchase an asset at or before a certain date for a price predetermined. This is an implicitly bullish outlook. A put option allows the buyer to sell. The call-put spread measures the difference between the volatility pricing of bullish calls and bearish put options.

Paradigm’s institutional over-the counter liquidity network reports that traders bought bitcoin calls due to expire in December, during the post CPI price decline from $31,000 to $30,200. The bullish movement was however limited in comparison to the Monday’s price drop.

The bias for calls is still intact, despite the choppy prices following the U.S. CPI. (Amberdata) (Amberdata)

After BlackRock filed a request for a bitcoin spot-based exchange-traded funds with the U.S. Securities and Exchange Commission on June 15, the options market became decisively bullish. Since then, bitcoin’s price has risen over 20% and the mood on the options market remains positive.

In the Wednesday edition of The Tie’s newsletter, Lawrence Lewitinn wrote that “only about a third” of open positions on the market were puts. This shows how crypto markets are still biased towards calls, just as they have been for many years.

What’s next?

Bitcoin’s failure to boost the CPI has confused many observers. Some attribute the lack of upward movement to a large move previously seized coins from the notorious darknet market Silk Road.

Analysts believe that the rally will resume soon, and more demand will flow in as prices surpass the $31,000 mark.

Richard Usher told CoinDesk that a move and close above 31,400 in BTC is needed to unlock more demand and gain. The soft reading of the U.S. CPI is likely to increase the risk across all asset classes.

Paradigm also expressed a similar view, stating that prices could increase to between $35,000 and $37,000.

“BTC skew calls > puts across a curve with Flag Patterns and Fibonacci Retracements suggesting that $35,000-$37,000 would be the next stop, if we could meaningfully break the $31,000 Resistance,” Paradigm wrote.

Sheldon Reback is the editor.