Bitcoin Options Markets Reflect Growing Trader Apprehension Amid Price Declines
Market caution surrounds Bitcoin as miners offload assets, yet analysts see potential buying opportunities in the dips.
Bitcoin Options Markets Reflect Growing Trader Apprehension Amid Price Declines
Bitcoin’s recent dive to $107,600 indicates an overall hesitation in the market due to rising miner outflows and economic pressures. Despite this dip, analysts maintain that such declines present good buying opportunities.
Key Takeaways:
- Increased demand for put options and BTC miner deposits highlights trader caution, even as prices hold around $108,000.
- Analysts at Bitwise suggest that significant shifts in market sentiment often hint at a rebound, characterizing the current correction as a potential “contrarian buying window.”
Bitcoin (BTC) dropped to $107,600 on Thursday, leading to speculation about whether this marks the end of a bullish trend that peaked at an all-time high on October 6. Mixed signals in the options market have made traders wary, particularly with miner outflows challenging the $108,000 support level.
Bitcoin options delta skew at Derbit
Bitcoin 30-day options delta skew at Derbit. Source: laevitas.ch
The Bitcoin options delta skew has moved past 10%, indicating that professional traders are prioritizing put (sell) options, a usual sign of bearish sentiment. Typically, under neutral circumstances, this metric stays between -6% and +6%. Notably, the skew has worsened since Friday, suggesting that traders are increasingly skeptical about the bullish outlook for Bitcoin.
President Donald Trump’s assertion that the trade war with China continues to impact market conditions. Trump has warned of further trade restrictions following China’s halt on US soybean purchases, according to Yahoo Finance. In addition, uncertainties regarding US economic data from the ongoing government shutdown add to market pressures.
Bitcoin options volumes showed a heavy preference for puts
Bitcoin options volumes put-to-call at Deribit. Source: laevitas.ch
Demand for downside protection on Deribit surged this Thursday, with put options volumes outpacing call options by 50%, indicating increased market stress. This has reached its highest level in over 30 days. Typically, cryptocurrency traders are optimistic; thus, a neutral reading for the put-to-call ratio is approximately -20%, favoring call options.
Bitcoin Derivatives Mirror Deteriorating US Macroeconomics
Bitcoin was not the only asset influenced by shifting investor sentiments, as evidenced by gold reaching a new all-time high on Thursday. Interest in short-term US government bonds also surged, coinciding with two Federal Reserve governors hinting at additional interest rate cuts in October — a move that generally reduces the attractiveness of fixed-income investments.
US two-year Treasury yield
US two-year Treasury yield. Source: TradingView
Yields on the US two-year Treasury saw a drop to the lowest rate in over three years, indicating that investors are willing to settle for smaller returns in exchange for the safety of government-backed assets. Meanwhile, gold reached $4,300, rising 23% since September, surpassing the value of central banks’ gold reserves against US Treasurys, according to Reuters.
Despite some good news in the tech sector, including positive quarterly results from Bank of America and Morgan Stanley, the S&P 500 dropped 0.9%. The Dow Jones US Select Regional Banks Index fell by 4.4% as two financial firms released reports of losses in the private credit sector, according to Financial Times.
Bitcoin miner outflows raise alarms
Data shows that miners deposited a significant amount of BTC on exchanges indicating potential price weakness.
Data from CryptoQuant reveals that miners have deposited 51,000 BTC (worth over $5.5 billion) on exchanges in the past week — the largest outflow since July. Historically, such actions by miners—who are usually significant holders of Bitcoin—often precede price drops.
While the signals from the Bitcoin options market indicate fears of further declines, Bitwise analysts expressed that extreme drops in sentiment often lead to favorable buying opportunities, adding that these recent market corrections were primarily driven by external issues.
Even with the likelihood of further downturns for Bitcoin, the increased demand for put options shouldn’t be interpreted as a sustained bearish trend, as traders are simply becoming more risk-averse due to external pressures.
