• Bitcoin options have turned their most pessimistic on the cryptocurrency’s near-term price outlook this year.
• 25% delta skew of Bitcoin options expiring 7 days from now fallen to around -6, lowest since late December 2022.
• While the 25% delta skew of options expiring in 30-days and 60-days fell to the lowest levels of the year, the 25% delta skew of options expiring in 90 and 180-days have been holding up close to zero.
Bitcoin Options Market Turns Most Bearish
In wake of Bitcoin’s latest slide below the $21,000 level on Thursday as traders mull headwinds including a growing liquidity crisis amongst major crypto-friendly banks and ongoing macro headwinds as the US Federal Reserve signals risks, Bitcoin options have turned their most pessimistic on the cryptocurrency’s near-term price outlook this year. BTC/USD was last trading in the $20,700s, lower by over 5.0% in the last 24 hours according to CoinMarketCap and now down roughly 18% from earlier yearly highs in the low-$25,000s.
Lowest Since Late December 2022
At the same time, the 25% delta skew of Bitcoin options expiring 7 days from now on Thursday fell to around -6, lowest since late December 2022. The 25% delta options skew is a popularly monitored proxy for the degree to which trading desks are over or undercharging for upside or downside protection via the put and call options they are selling to investors. Put options give an investor right but not obligation to sell an asset at predetermined price while call option gives an investor right but not obligation to buy asset at predetermined price. A 25% delta options skew above 0 suggests that desks are charging more for equivalent call versus puts implying there is higher demand for calls versus puts which can be interpreted as a bullish sign as investors are more eager to secure protection against (or bet on) rise in prices.
Longer-Term Price View Holding Firm
While longer term perspective still holds firm with respect to Bitcoin’s future price outlook despite current market uncertainties and bearish sentiment surrounding near term prices. The 25% delta skew of options expiring in 30-days and 60-days also fell to their lowest levels of year around -3 and -2 respectively but those expiring in 90 and 180 days remain close to zero suggesting that investors are taking view that current headwinds faced by market (crypto banks falling etc.) unlikely send bitcoin lower sustained basis form current levels.
Options Markets Send Message Of Sanguine On Price Volatility Risks
Options markets are also sending message that bitcoin investors remain fairly sanguine on price volatility risks with Implied Volatiltiy according At The Money (ATM) Options expiration 7, 30 ,90 &180 days broadly unchanged over course last month meanwhile Deribit’s Bitcoin Volatility Index (DVOL) remains 49 close recent weeks lows indicating these investors remain quite relaxed about downside potential even if near term prices continue their downward trajectory .
Overall it looks like short term bearishness is prevailing among bitcoin option traders who anticipate further declines near term however there appears enough resilience amongst longer dated contracts which suggest investors maintain belief BTC will recover after recent losses & regain its uptrend eventually