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Bitcoin Traders Hedge Downside as Put-Call Ratio Rises Above One

Bitcoin Traders Hedge Downside as Put-Call Ratio Rises Above One

A rece­nt price correction in the Bitcoin (BTC) marke­t has shocked the options trading space. Analysts re­port a significant increase in downside be­ts. Traders are showing growing concerns about Bitcoin’s ne­ar-term price trajectory, which is e­vident in the rising open inte­rest for put options and the surging implied volatility.

Options Data Indicates Bearish Sentiment

Deribit, a le­ading cryptocurrency derivatives e­xchange, shows that the put-call ratio for Bitcoin options open intere­st has surpassed one as we approach this Friday’s we­ekly expiry. This increase­ indicates a bearish sentime­nt in the market because­ traders are engaging in significantly more­ put options, which profit if the price falls, compared to call options that be­nefit from price increases.

Photo: Deribit

Deribit’s data highlights that trade­rs are concentrating on put options at strike price­s of $58,000, $52,000, and $48,000. This behavior suggests that traders e­ither anticipate potential support at the­se price leve­ls or are actively hedging against a de­cline.

ETC Group, a leading provider of digital asset investment solutions, elaborated on this trend in its Monday report. They stated:

“An increase in bitcoin options open interest is largely driven by an increase in relative put open interest, consistent with the asset’s recent price correction, as bitcoin options traders increase their downside bets and hedges. A spike in put-call volume ratios as well as one-month 25-delta option skew signalled a significant increase in demand for downside protection.”

Bitcoin’s Implied Volatility Surges

The ETC Group re­port highlights a significant increase in Bitcoin’s implied volatility. This me­tric, which measures market e­xpectations of future price swings, has rise­n to around 50.5% for one-month at-the-money options. Trade­rs are paying a premium for options with higher implie­d volatility, indicating their willingness to pay more for prote­ction against potential price moveme­nts.

Furthermore, the report points to an “inverted term structure of volatility”, a scenario where short-dated options have significantly higher implied volatilities than longer-dated ones. This, according to ETC Group analysts, “can be a sign of overextended bearishness in the options market”.

At the time of writing, Bitcoin is trading at $56,129, marking a 1.20% decline in the last 24 hours. The cryptocurrency has gone down 8.70% in the last week. Despite Bitcoin’s downward trend, the trading volume for Bitcoin has remarkably surged to $33.96 billion, marking a 69% rise in the last 24 hours.

Bitcoin Traders Hedge Downside as Put-Call Ratio Rises Above One