A speculative frenzy seems to have gripped the market, which could lead to a sudden sentiment shift and two-way price turbulence.
According to a recent article by Omkar Godbole on CoinDesk, JPMorgan’s retail sentiment score for BTC and BTC-tied assets hit a record high last week. This measure is designed to gauge the sentiment of retail investors toward cryptocurrencies, especially bitcoin, based on the activity in the family of BTC products, including spot ETFs.
The score rose to a record high of 4, indicating a substantial and positive deviation from the average, indicating strong demand. This is reflected in the surge in inflows into the U.S.-listed spot ETFs and crypto stocks, with the demand for Bitcoin ETFs being particularly strong.
Meanwhile, the options market tied to shares in bitcoin-holder MicroStrategy (MSTR) exhibited a record bullish sentiment, also pointing to frenzied trading often observed at market peaks. The one-year 25-delta put-call skew nosedived to -26.7%, indicating that call options used to hedge against or profit from price rallies traded at a significantly higher premium to puts offering downside.
This surge in retail investor sentiment can be unpredictable, potentially leading to a sharp and painful market reversal. As Omkar Godbole notes, “Call skew in MSTR is so wildly euphoric that it is hard to imagine we don’t see a more meaningful drawdown unless bitcoin continues to move in a parabolic fashion higher. For now, it appears to be cooling off just a little bit from its highs.”
Predictions:
Based on the current market trend and the surge in retail investor sentiment, it is likely that the market will experience a sudden sentiment shift and two-way price turbulence in the near future. This could result in a sharp correction in the price of bitcoin and other crypto-linked assets.
However, it is also possible that the market will continue to move in a parabolic fashion higher, driven by the strong demand for bitcoin and other cryptocurrencies. This could result in a prolonged period of price appreciation, but it is also likely to be accompanied by increased volatility and unpredictability.
Ultimately, the direction of the market will depend on a variety of factors, including global economic trends, regulatory developments, and investor sentiment. As always, it is essential to approach the market with caution and to carefully consider your investment decisions.
