Bitcoin loses its price gains for the new year, but $120,000 bets are still hot

The new year started on a good note with Bitcoin (BTC) moving towards $100,000, leading to a weak price decline in December. In the midst of joy, CoinDesk warned Against over-optimism, noting the undercurrents of sellers looking to reassert themselves.

A week later, Bitcoin fell to $93,000 after failing to maintain gains above $100,000 on Monday, CoinDesk data shows.

The latest decline comes at a time of increasing volatility in the US Treasury bond market, with long-term yields extending their rise in the fourth quarter of 2024 to reach their highest levels in several months due to economic data pointing to stubborn inflation in the United States.

It’s not just nominal bond yields that are at issue, but real or inflation-adjusted yields are also creeping up. The yield on US 10-year inflation-linked securities jumped to 2.29%, the highest level since November 2023, according to charting platform TradingView.

As the returns offered by fixed income products begin to look more attractive in real terms, the incentive to invest in risky assets diminishes. This is especially true when the rise in yields is driven by a hawkish Fed outlook rather than economic growth.

And that’s exactly the case this week. With the data pointing to steady inflation, traders pushed back the next Fed rate cut to June.

“The decline in the spot price of Bitcoin this morning appears to be in response to rising yields in the Treasury market and the lower likelihood of further interest rate cuts this year. This has impacted the short-term market outlook for crypto assets, which tend to deliver better outcomes. In more liquid conditions,” Thomas Erdosi, head of product at CF Benchmarks, told CoinDesk.

Note that rising yields are not just a US-centric issue. Yields are rising in major economies as Japan and the UK join the fray. The UK is seeing its highest long-term returns since 1998.

All of this affects stocks, similar to what happens with Bitcoin. Major indexes like the Nasdaq and S&P 500 also lost ground in the new year.

But here’s a twist: Despite the overall uncertainty, Deribit’s BTC-listed options market remains bullish, with the dollar value of calls active. Sorting $14.87 billion at press time, nearly double the value of active deals, according to data source Amberdata.

A call buyer is implicitly bullish in the market while a call buyer is implicitly bearish.

Furthermore, the $120,000 strike call option remains the most popular, with a notional open interest of $1.47 billion. The calls at the $101,000 and $110,000 strikes also feature an open interest of over $1 billion each. Meanwhile, the most popular $75,000 put option has open interest of $595 million.

In general, calls that expire after January continue to trade at a notable premium, reflecting a bullish bias.

“We will likely see a change in market fortunes by the end of this month. The inauguration of President Trump on January 20, which heralds an increased likelihood of a more favorable regulatory environment for cryptocurrencies, could be a major driver of cryptocurrency market sentiment,” Erdosi added.