Analysis: For the third consecutive year, we saw unusually high alpha flow in short-term Bitcoin call options in the week of January 10

Gordon Grant, a cryptocurrency derivatives trader, highlighted the significance of Bitcoin’s recent breakout, citing derivatives indicators. “Once again, for the third year in a row, we saw unusual ‘high alpha’ flow in short-term Bitcoin call options in the week of January 10,” Grant said, noting that more than 1,000 January 7 call options were traded at a strike price of $103,000 last weekend. Grant compared this to the situation in early 2023, when similar activity in short-term call options preceded Bitcoin’s explosive rise, helped by a rapid repricing of volatility from 20% to 30% to over 60%. He also noted that in January 2024, a large amount of call option activity before the launch of BlackRock’s IBIT on January 10 stimulated Bitcoin’s rise from $40,000 to $48,000. He also said that the option term structure shows a premium for dates after Trump’s inauguration, which may reflect traders’ pricing of potential market volatility events or gamma-driven positioning. The key question now is whether this marks the start of a sustained rally for Bitcoin through 2025, or whether this is just short-term excitement fueled by speculative bets on another Trump-related event, similar to last July’s Bitcoin Nashville event. “The term structure of volatility and skew seems to suggest that investors are seeking long-term gains this year beyond just the first week’s gains,” Grant said. (The Block)