Bitcoin has returned to its well-known consolidation range, hovering between approximately $65,000 and $74,000, following a brief effort to breach the higher resistance levels near $76,000 earlier this week that ultimately fell short. Currently trading at approximately $69,000, insights from market analysts indicate that the market is expected to stay in an accumulation phase until the end of March. Various indicators suggest a decrease in near-term volatility, while defensive positioning appears to be increasing. Updates underscore unprecedented positioning in derivatives markets: options open interest has hit a new all-time high as we approach the expiry of the current quarter. The elevated positioning could indicate short-term hedging instead of a strong directional conviction. The firm pointed out that a clearer picture of the refreshed positioning and sentiment is expected to emerge following the March 27 expiry.
Volatility metrics are indicating a trend towards normalization. At-the-money implied volatility (1-week ATM IV) has decreased from approximately 70% to 53%, while longer-dated maturities have seen a decline of about 10 vols from their recent peaks. The decline in implied volatility suggests that traders anticipate milder price fluctuations in the near future. Despite a decline in implied volatility, skew measures have expanded again toward the downside. Following the unsuccessful attempt to breach the $75,000 mark, interest in downside protection surged once again, with the 25-delta skew shifting into the 15–20% range. The uptick in premium for put options indicates a heightened sense of caution among market participants, who are actively seeking safeguards against a potential market reversal. The caution is evident in the flow dynamics. According to the report, the put/call ratio indicated that there is limited momentum to support a move above $75,000. During the ascent, the market saw a significant amount of put buying above $72,000, indicating a typical sign of a fading breakout. Conversely, the subsequent pullback was marked by a short-lived increase in call purchases.
In the latest 24-hour trading session, buy orders dominated with a 30.7% share of the activity, while call options trailed behind at approximately 10%. This shift highlights a defensive posture following the rejection at $75,000. Gamma positioning has been recalibrated. In the lead-up to the Q1 expiry, short gamma exposure at the 75,000 strike saw a significant contraction, dropping from $3.9 billion to $2.4 billion in less than 48 hours, marking a $1.5 billion unwind as prices shifted away from that strike level. Reduced gamma exposure lessens the necessity for dealers to engage in dynamic hedging, consequently mitigating directional flows and providing insight into a portion of the recent pullback. The volatility risk premium has undergone a reset. In the last week, short-gamma positions proved to be lucrative as implied volatility outpaced realized volatility. However, during the selloff, realized volatility surged, leading to a compression of the VRP. With VRP approaching equilibrium, option prices appear to be more fairly valued—suggesting that the market might be entering a consolidation phase instead of gearing up for an imminent breakout.
In a recent analysis, market expert Ali Martinez highlighted a longer-term technical backdrop that could be seen as constructive. He pointed out that Bitcoin is nearing a multi-year trendline that has historically bolstered significant advancements in past cycles. The expert emphasized that each interaction with this crucial support over the last nine years has been followed by notable rallies: the 2017 parabolic surge, the 2020 bounce back from the COVID crash, and the 2022 resurgence post-FTX collapse. The trendline currently resides between approximately $60,000 and $56,000. Should it maintain its position, Martinez suggests that this region could evolve beyond merely a bounce zone, potentially acting as a launchpad for the upcoming sustained bull phase.