Bitcoin Traders Are Turning Bearish Short-term
Crypto analysts have recently suggested that traders of bitcoin options are doing a short-term disservice, but that is not the case, according to a new report. The fact that Bitcoin (BTC) has climbed above the $9,400 mark has led analysts to become sceptical about the chances of a positive breakout.
Although the support of $9,000 has remained strong over the past 50 days, slightly negative indicators tend to get more attention from media pundits.
In reality, it interprets the signal of a data point as merely a signal of a long-term trend in bitcoin price trends, not a short-term trend. Crypto media is focused on Bitcoin’s 25% imbalance, with options traders becoming bear-heavy in the short term. This is an options trading concept that compares the skewed price of Bitcoin and other cryptocurrencies in terms of their call options. A positive bias means that the implicit volatility of the put is greater than the call, suggesting a higher risk of a short-term Bitcoin price decline than a long-term Bitcoin fall. Normally, we can assume that investors are more bear-heavy on the downside because protection against upside protection is more expensive than protection against upside protection, but deeper analysis shows that this is not the case at the moment.
Bitcoin’s price at its current level is nothing unusual in history and is being improved by many investors.
The most commonly used measure is the 25% delta, which corresponds to an option priced with a 25% probability. As the chart above shows, the average price of BTC options on US exchanges has peaked at 23% in recent weeks, compared to the current 12%. Meanwhile, the 3-month options have an earlier peak of 6%, compared to the actual 4%, and the 4-month options have a 3% delta bias.
Far from pointing to anything unusual or extremely bear-like, this skew indicates the potential for short-term market volatility. In short, investors “ability to buy such options effectively will be determined by whether protection is more expensive on the downside than on the upside.
The latest data from the US Commodity Futures Trading Commission do this by measuring the open interest of call options and comparing it to put options (up or down 20%). At 7,500 BTC, the 12 K-put open interest through July expires at about $12,000, compared with the current $7,500. The situation is even more one-sided with the Put Options, as a total of 13 K options are open for expiry in July. It shows that the price of BTC has been trading at a high level in recent months, although not much is being traded.
The Future of The Market Remains Bullish
This ratio slightly reduces the significance of the tilt curve and the difference between the bullish and bullish call options on the Bitcoin price curve.
One way to gauge the mood of professional investors is to look at the futures market premium for perpetual swaps. The higher the premium for the market, the higher the risk of a short-term price fall. In a situation known as contango, long-term contracts tend to trade in the same direction as short-term futures, signalling a healthy market.
Since the Bitcoin Options Market (BTC) is still an emerging industry, it is unlikely that a single derivative indicator will provide a clear market picture. Moreover, it currently covers only a small part of the market and not even a fraction of the top 10 stock exchanges.
Differences could also be caused by option market makers, who may not be able to add risk to the current level of implicit volatility. In the meantime, we can forget about the better insight into the B-bets of professional investors by measuring put and call open interest before the deadline. July and August expiries favour bully positions with a high number of open positions and a low number for July expirations. The 25% delta bias should not be interpreted as an indicator of the bears, but there is sufficient evidence to suggest it.