Bitcoin dropped almost 7% for a short while a day after an historic surge past US$100,000 ($134,030.50) led some traders to hedge for a retreat.
The digital asset fell as low as US$92,144 on Friday before steadying at US$97,325 at 9.05am in Singapore. Volatility hit the wider crypto market too amid a hiatus in a rally fueled by US President-elect Donald Trump’s embrace of the sector.
Demand has ticked up for bearish wagers such as put options, which provide the right to sell at a predetermined price in a set period. Some of the most notable activity was for puts with strike prices of US$95,000 and US$100,000, according to Amberdata. Demand for puts in the US$75,000 and US$70,000 range also increased.
“Although it feels like we’ve still got room to run, investors taking some profits off the table is expected,” said Josh Gilbert, market analyst at eToro. “If we look back at previous cycles, it’s not unusual to see 20% to 40% drawdowns in the Bitcoin price during bull markets.”
Bitcoin, the largest digital asset, pierced the US$100,000 price level Thursday on optimism that Trump’s pick of a digital asset proponent to be the next head of the US securities regulator will push crypto further into the mainstream.
Trump has vowed to undo a Biden administration clampdown on digital assets and turn the US into the global home of crypto.
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The Republican even backed the idea of a strategic national Bitcoin reserve, a controversial idea that former US Treasury Secretary Lawrence Summers called “crazy”.
White House czar
See also: Bitcoin hits US$100,000 for first time on optimism over US support
Late Thursday in the US, Trump posted on Truth Social that David O. Sacks will be the White House czar for artificial intelligence and the cryptocurrency industry. “He will work on a legal framework so the crypto industry has the clarity it has been asking for, and can thrive in the US,” Trump said.
The president-elect’s support for virtual currencies is underpinning sentiment, buttressed by US$32 billion of net inflows into US Bitcoin exchange-traded funds this year. At the same time, the token’s 45% advance since Election Day on Nov 5 raises the question of whether the rally is due a breather.
“This spike in volatility over the last 24 hours has the hallmarks of a classic blow-off top,” said IG Australia Pty Market Analyst Tony Sycamore. “While we don’t see this as the end of the Bitcoin bull run, it does signal we are entering a consolidation phase in the days or weeks ahead.”
Other parts of the derivatives market signal ongoing optimism into 2025. On the Deribit exchange, the highest open interest for options expiring at the end of January is for contracts with strike prices of US$110,000 and US$120,000.
Chart: Bloomberg
