Bitcoin Retraces Gains Following New Year’s Surge, but $120K Targets Continue to Attract Attention

Despite a recent downturn, Bitcoin (BTC) remains a popular asset in the options market, with continued bullish sentiment. After a promising start to the year, pushing Bitcoin towards the $100,000 mark, it has since retraced to around $93,000. This retreat follows an increase in volatility within the U.S. Treasury market, where bond yields have surged to multi-month highs, driven by persistent inflation concerns in the U.S.

Alongside rising nominal bond yields, inflation-adjusted or real yields are climbing as well. The yield on the 10-year U.S. inflation-indexed security has surged to 2.29%, marking its highest point since November 2023, according to data from TradingView. As yields from fixed-income investments become more attractive in real terms, the appetite for riskier assets like Bitcoin tends to decrease, particularly when the yield increase is based on expectations of a hawkish Federal Reserve stance rather than economic expansion.

The recent shift in expectations surrounding U.S. interest rates is significant. With inflation data suggesting persistence, traders are now anticipating that the next Federal Reserve rate cut could come as late as June. As a result, Bitcoin’s price has seen downward pressure, as higher interest rates can dampen the appeal of risk assets like cryptocurrencies.

This trend is not limited to the U.S., with countries like Japan and the U.K. experiencing rising yields as well. In fact, the U.K. is witnessing its highest long-term yields since 1998. The global impact of rising yields is also being felt in traditional markets, with major stock indices such as the Nasdaq and S&P 500 losing ground, following similar trends seen in Bitcoin.

Despite these macroeconomic concerns, optimism remains in the Bitcoin options market. According to Amberdata, the value of active call options on the Deribit exchange has reached $14.87 billion, nearly double the value of put options. Call options are typically associated with bullish sentiment, indicating that traders remain confident in Bitcoin’s future performance.

The $120,000 strike price remains the most popular for call options, with open interest at $1.47 billion. Other strikes at $101,000 and $110,000 also feature substantial open interest, while the most popular put option at $75,000 has an open interest of $595 million. Overall, calls expiring after January continue to trade at a premium, further suggesting a prevailing bullish sentiment in the market.

Analysts, such as Thomas Erdosi, head of product at CF Benchmarks, believe that Bitcoin’s market fortunes could change by the end of January. The inauguration of President Trump on January 20 could usher in a more favorable regulatory environment for cryptocurrencies, potentially boosting market sentiment and shifting the outlook for Bitcoin and other digital assets.