Last week saw JPMorgan’s retail sentiment score for Bitcoin (BTC) and related assets reach a record high. This development is particularly noteworthy in the context of MicroStrategy’s options market, which exhibited extreme upside fear or bullish speculative frenzy.
Bitcoin’s Wild Rise Since Election Day
Since Donald Trump won the U.S. presidential election on November 5th, BTC has seen an impressive surge in value, accompanied by significant inflows into U.S.-listed spot ETFs and crypto stocks. This uptrend has led to JPMorgan’s retail sentiment score rising to a record high of 4. The measure is designed to gauge the sentiment of retail investors toward cryptocurrencies, particularly Bitcoin, based on activity in the family of BTC products, including spot ETFs.
Retail Sentiment Score: A Record High
JPMorgan’s equity research team noted that within the ETF space, demand for Bitcoin ETFs was exceptionally strong following the election results. The sentiment score for the Bitcoin family (both physical ETFs and others) soared to a multi-sigma high, as indicated by a z-score of 3.4 or higher.
* **What is a z-score?**
A z-score measures the number of standard deviations an observation is away from the mean. In this case, a z-score of 3.4 indicates a substantial and positive deviation from the average, signifying strong demand.
Bullish Sentiment in MSTR’s Options Market
The options market tied to shares in MicroStrategy (MSTR), a company known for its significant holdings of Bitcoin, exhibited an exceptionally bullish sentiment last week. This phenomenon is often observed at market peaks and can be a sign of frenzied trading.
* **What does the put-call skew indicate?**
A put-call skew is a measure used to gauge market sentiment. In this context, it shows that call options (used to hedge against or profit from price rallies) traded at a significantly higher premium to puts (offering downside protection).
According to Markets&Mayhem’s analysis of the data, the one-year 25-delta put-call skew nosedived to -26.7% on Wednesday, indicating an extreme bias towards upside bets.
Extreme Upside Fear or Bullish Sentiment?
The record bullish sentiment in MSTR’s options market is a sign that some investors are speculating heavily on the potential for further price gains. However, this level of enthusiasm can also lead to market volatility and unpredictable outcomes.
* **What does it mean for retail investor sentiment?**
While BTC and other crypto-linked assets may be solid long-term investments, surging retail investor sentiment can be a sign of speculation rather than fundamentals-driven growth.
The authors of TheMarketEar analytics service referred to the skew as "beyond extreme upside fear." This phenomenon is worth noting, especially for those considering investing in cryptocurrencies.
Conclusion
While JPMorgan’s retail sentiment score and MSTR’s options market exhibit a record bullish sentiment, it’s essential to remember that this level of enthusiasm can be a sign of speculation rather than fundamentals-driven growth. As such, potential investors should exercise caution and carefully consider the risks involved before investing in cryptocurrencies.
Sources:
- JPMorgan
- Markets&Mayhem
- TheMarketEar analytics service
