SUMMARY
- The skewed probability hints at a potential price pullback.
- Trump media shares saw this pattern before their recent decline.
The price of Bitcoin, which is presently having difficulty staying above $90,000, is indicating possible downside concerns. Recent data from the Bitcoin options market listed on Deribit shows an inferred probability distribution pattern similar to the one that predicted the recent drop in Trump media shares. This distribution reveals the market’s assigned probabilities for various future asset price levels, calculated from options prices across a range of strike prices and expiration dates.
The distribution has moved to the left, suggesting that market players anticipate a greater chance of Bitcoin trading at lower prices, according to cryptocurrency finance platform BloFin. This “left shift” is observed in options for assets such as MSTR and COIN in addition to Bitcoin, according to Griffin Ardern, head of options trading and research at BloFin. This change implies that traders agree that the values of Bitcoin and other cryptocurrencies are still high and that more declines are possible.
Ardern noted that a comparable left shift in the DJT options market preceded its recent price decline. After surging to $54 at the end of October, DJT’s share price halved to $27 within just over two weeks, following anticipation of Republican candidate Donald Trump’s victory in the November 5 U.S. election. Although Trump, a known proponent of cryptocurrencies, won as expected, BTC surged over $20,000, reaching a peak of $93,000 before retreating.
Currently, BTC is trading at $88,100, as per CoinDesk data. Supporting the possibility of further price drops are recent hawkish remarks by Federal Reserve officials. Fed Chairman Jerome Powell indicated that there are no immediate economic signals necessitating faster rate cuts, which dampened expectations for a quicker easing of monetary policy. While the Fed’s 75 basis point rate cuts since September have generally been bullish for risk assets, Powell’s latest comments highlight that rate reductions may not accelerate soon.
This stance adds weight to the implied probability distribution’s signal, which points to potential downside risk in BTC prices. If traders’ implied expectations hold, Bitcoin may experience additional corrections from its current levels.