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Appetite for Bitcoin ramps up after positive inflation results, shows options data

Investor sentiment shifts towards bullish as Bitcoin options volatility suggests a balanced market outlook.

Bitcoin options chart with rising demand.

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CME Bitcoin options suggests investors are showing a heightened interest in Bitcoin’s future, according to volatility data gathered by CF Benchmarks. This increase in appetite is likely tied to the inflation data published yesterday, which came within the expectations for the first time this year.

The CF Bitcoin Volatility Index has revealed a trend towards increased demand for options with expiries beyond 80 days, indicating a market positioning for potential price movements over an extended period. Despite more modest changes in shorter-dated options, the overall sentiment is bullish, with expectations of further Bitcoin gains as disinflation appears to be picking up pace.

The post-CPI volatility surface further underscores the growing investor appetite for Bitcoin after the recent cooler inflation data. A pronounced volatility skew in short-term options reflects a cautious stance on immediate downside risks, with investors showing a willingness to pay a premium for protective puts.

However, the skew diminishes with longer-dated options, suggesting a more optimistic view of Bitcoin’s long-term prospects, as indicated by the increased willingness to purchase out-of-the-money calls.

This shift towards a balanced view of potential upsides and downsides, particularly in longer-dated options, may signal a rise in institutional interest. Such investors typically exhibit a more sophisticated market understanding and are less susceptible to wide sentiment swings.

Therefore, while some near-term caution remains, the volatility surface points to a growing bullish sentiment on Bitcoin for the medium to long term. The rising demand for longer-dated calls and the moderating skew hint at a belief that the recent disinflation could mark a pivotal moment for Bitcoin, potentially leading to a rally in the coming months.

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