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Bitcoin options traders have executed a stunning U-turn, ditching last year’s sky-high hopes for a decidedly pessimistic outlook. The once-rampant bullish fervor has completely evaporated, replaced by a chilling wave of bearish bets.
Since late last year, a feverish bullishness gripped crypto traders. Ignoring earthly constraints, they chased stratospheric gains, loading up on Deribit call options with audacious $100,000, $120,000, and even $140,000 strike prices. For weeks, the $140,000 call reigned supreme. Its notional open interest – the raw dollar power of active contracts – consistently punched above a staggering $2 billion.
The winds have shifted dramatically in the Bitcoin options market. Remember those audacious $140,000 calls, once the darlings of speculation with a staggering $1.63 billion open interest? They’ve been dethroned. Now, the bears are circling, their $85,000 puts leading the charge with a hefty $2.05 billion. But the pressure doesn’t stop there. A growing wall of protective puts at $80,000 and $90,000 further overshadows the faded dreams of that six-figure Bitcoin future.
The crypto winter just got a whole lot icier. Remember those sunny October days when Bitcoin flirted with six figures? Gone. Vanished. Since October 8th, BTC has plummeted, shedding over 25% of its value and crashing below $91,000, according to CoinDesk. The bulls have officially retreated, replaced by a chilling wave of bearish sentiment.
Think of put options as your “price slide insurance.” You’re betting the market is heading south. When you buy a put, you’re buying theright, not theobligation, to sell something at a specific price later on. It’s the ultimate bearish play – either you profit from the drop, or you’ve protected yourself from a potential loss. Calls, on the other hand? That’s a straight-up bullish bet.
BTC options: open interest distribution at various strikes. (Deribit)
Decoding the Bitcoin Options Market: A Wall of Support is Forming.
The Bitcoin options market is flashing a signal: Investors are piling into out-of-the-money puts. Looking at the open interest distribution across strike prices and expiry dates, a distinct pattern emerges – a growing concentration of OI in lower strike puts, suggesting a strong belief (or hedge) against potential downside risk. Are we witnessing the construction of a formidable price floor?
Though bullish bets still dominate, whispers of caution echo through the options market, with put options commanding a surprisingly high price – a clear sign that investors are hedging against a potential downturn.
Options traders are bracing for potential year-end turbulence. Jean-David Pequignot, CCO at Deribit, notes significant activity in short-dated put options, specifically those targeting the $84K-$80K range. This surge in protective positioning has front-end implied volatility hovering near 50%, and the options curve reveals a pronounced put skew (+5%-6.5%), signaling a strong demand for downside protection as the year closes.
Derive.xyz, a decentralized options exchange, is flashing red. The 30-day skew, a measure of put option demand, has plunged to -5.3% from -2.9%. This suggests traders are scrambling for protection, aggressively buying put options as a shield against potential price drops. It’s like watching investors rush for lifeboats as storm clouds gather on the horizon.
As the crypto world braces for year-end volatility, a fascinating trend is emerging in Bitcoin options: a surge of bets on a potential price drop. Dr. Sean Dawson of Derive.xyz reveals a significant concentration of BTC “put” options, especially around the December 26 expiry, with a focal point at the ambitious $80,000 strike. Is this a sign of bearish sentiment, or a strategic play by savvy investors anticipating a pre-holiday dip before a potential rally?
Wall Street’s year-end rally is on life support. Lingering doubts about the U.S. job market’s strength, coupled with a coin-flip chance of a December rate cut, have sucked the wind out of bullish sails. According to Dawson, traders have little incentive to chase gains as the clock winds down.
What next?
The market’s plunge might be nearing its end. Sellers, emboldened by a seemingly easy downward path, may soon find themselves running out of ammunition. Technical whispers hint at an oversold state, while the mood on the street is one of extreme pessimism – often a contrarian signal.
“As the Fear & Greed Index hovers near a chilling 15 and the RSI flirts with oversold territory around 30, something intriguing is unfolding: whale wallets, bulging with over 1,000 BTC, have noticeably grown in the last week. Is this the ‘smart money’ quietly feasting on undervalued crypto morsels while others panic?” – Pequignot noted.
“Short-term caution is warranted; the current market leans bearish. However, crypto history whispers of fortunes favoring the courageous when fear peaks like this.”
Read: Bonds Hint at Rebound: Crypto Daybook Americas
Thanks for reading From $140K Call to $80K Put: Bitcoin (BTC) Positioning Reverses Completely
