Bitcoin choices have flipped the script with a full 180-degree shift from final yr’s uber bullish bets to a sharply bearish stance.
Since late final yr, merchants had been aggressively chasing bullish strikes by piling into name choices at strikes of $100,000, $120,000, and $140,000 on Deribit. Up till latest weeks, the $140,000 name was the most well-liked on Deribit, with notional open curiosity (OI), or the greenback worth of the lively contracts, constantly above $2 billion.
Now, that’s modified. The $140,000 name’s open curiosity stands at $1.63 billion. In the meantime, the $85,000 put has taken the lead with $2.05 billion in open curiosity. Places at $80,000 and $90,000 strikes additionally now eclipse the $140,000 name.
Clearly, the sentiment has shifted decisively bearish, and never surprisingly so, as BTC’s worth has collapsed over 25% to $91,000 since Oct. 8, CoinDesk knowledge reveals.
Put choices give the purchaser the precise, however not the duty, to promote the underlying asset at a predetermined worth at a later date. A put purchaser is implicitly bearish in the marketplace, trying to revenue from or hedge in opposition to anticipated worth slides within the underlying asset. A name purchaser is bullish.
The chart reveals the distribution of open curiosity in BTC choices at numerous strike worth ranges throughout expiries. Clearly, OI is getting stacked at decrease strike places, the so-called out-of-the-money put choices.
Whereas the variety of lively calls remains to be notably greater than places, the latter are buying and selling at a big premium (or skew), reflecting draw back fears.
“Choices mirror warning heading into year-end. Brief-dated places with strikes at $84K to $80K have seen the most important buying and selling volumes in the present day. Entrance-end implied volatility sits round 50%, and the curve reveals a heavy put skew (+5%-6.5%) for draw back safety,” Deribit Chief Industrial Officer Jean-David Pequignot stated in an e mail.
Choices exercise on decentralized alternate Derive.xyz paints an analogous bearish image, with the 30-day skew falling to -5.3% from -2.9%, an indication of merchants more and more paying up for draw back insurance coverage, or put choices.
“Looking forward to year-end, there’s now a sizeable focus of BTC places constructing across the December 26 expiry, significantly on the $80K strike,” Dr. Sean Dawson, head of analysis at main onchain choices platform Derive.xyz, advised CoinDesk.
With ongoing issues in regards to the resilience of the U.S. job market and the likelihood of a December fee lower slipping to barely above a coin toss, there’s little or no within the macro backdrop giving merchants a purpose to remain bullish into the shut of the yr, Dawson defined.
What subsequent?
Whereas the trail of least resistance seems to be on the draw back, the promoting could quickly run out of steam as technical indicators level to oversold circumstances and sentiment is at bearish extremes.
“With a Concern & Greed index round 15 and an RSI nearing 30 (oversold however not but excessive), whale wallets (>1,000 BTC) have elevated notably prior to now week, hinting at smart-money accumulation at undervalued ranges,” Pequignot stated.
“General, draw back fears are justified within the quick time period and the trail of least resistance stays decrease for now, however excessive setups like this have rewarded the daring in crypto’s previous,” he added.
