Last week, the sentiment among retail investors towards Bitcoin (BTC) and other BTC-tied assets reached a record high, according to JPMorgan. The bank’s retail sentiment score, which measures the sentiment of retail investors towards cryptocurrencies, rose to a record high of 4. This surge in sentiment was driven by the rise in BTC’s price, which surpassed $64,000 last week.
At the same time, the options market for MicroStrategy (MSTR), a company that holds a significant amount of BTC, showed extreme bullish sentiment. The one-year 25-delta put-call skew, which measures the difference in price between call options (used to bet on price increases) and put options (used to bet on price decreases), reached a record low of -26.7%. This indicates a strong bias towards upside bets.
However, some analysts warn that this extreme bullish sentiment could lead to a market reversal. The skew for MSTR is described as “beyond extreme upside fear,” and it is hard to imagine a meaningful drawdown unless BTC continues to rise in a parabolic fashion. This sentiment could be unpredictable and potentially lead to a sharp and painful market reversal.
While BTC and other crypto-linked assets may be solid long-term investments, investors should be prepared for potential twists and turns in the market as sentiment reaches frenzied levels.
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