Bitcoin market sees increased call premiums as traders bet on post-election upside

Bitcoin options traders are paying significant premiums for call options, indicating growing optimism about the digital asset's future price gains, an analyst said.

The 1-month 25-delta skew for bitcoin options currently favors calls by approximately 3.3 points, with traders increasingly paying premiums for these positions. This skew suggests that derivatives traders are preparing for potential price increases in bitcoin, says an OTC trader at Wintermute, Jake Ostrovskis.

"This premium on calls is a clear signal of bullish sentiment in the market," Ostrovskis told The Block.

Ostrovskis highlighted the potential for further upside, noting that while this skew is significant, it’s still below levels seen in earlier 2024 when it reached around 7 points. "This reading is in the 62nd percentile historically, this suggests there could be more upside to come," he said.

Implied volatility has fallen since Trump's U.S. election win

Implied volatility for bitcoin options, which had spiked ahead of the U.S. election, has since fallen to a more neutral level as election-driven hedging has subsided.

"The 30-day at-the-money implied volatility is currently in the 30th percentile, which some traders see as an opportunity to buy 'cheap' optionality as bitcoin’s spot price enters a new phase of price discovery," Ostrovskis noted.

According to Bitwise Europe analysts, open interest in bitcoin options has surged over the past few days, approaching highs that were last seen in March 2024. The Bitwise analysts noted a bias toward calls, also observing that the 1-month 25-delta skew is approximately 6% in favor of calls on an annualized basis, underscoring traders’ positive outlook.

"Bitcoin option implied volatilities have drifted sharply lower, despite the fact that 1-month realized volatility has increased, most likely due to the fact that short-dated options have been unwound with the decrease in U.S. election hedging activity," Bitwise analysts said in an email sent to The Block.

Broader crypto market sentiment rises following Trump’s election win

The broader crypto market has seen a sentiment boost since the U.S. election, with bitcoin climbing to over $85,000 in the past 24 hours. According to Bitwise Head of Europe Bradley Duke, investor sentiment is at its highest in three years, with many seeing Trump’s win as a favorable turn for the crypto market.

"There is a strong expectation of changes at the SEC, including potentially replacing Gary Gensler, which could create a more welcoming regulatory environment for crypto," Duke said.

Rumors of a U.S. strategic bitcoin reserve have also circulated following Senator Cynthia Lummis’s, R-Wyo., proposal to purchase 200,000 bitcoin annually over the next five years. If adopted, such a reserve would position the U.S. government as a major bitcoin holder and could spur similar moves from other countries. Combined with macro trends favoring bitcoin’s scarcity narrative, these developments have fueled optimism across the market.

Bitwise’s CIO Matt Hougan has projected that bitcoin could reach $100,000 by year’s end, with the potential to approach $200,000 by the end of 2025, driven by strong institutional participation and the favorable macroeconomic environment.