Whereas the worth of Bitcoin (BTC) has been declining sharply, a placing positioning has emerged within the choices market.
Jeff Park, ProCap’s chief funding officer and Bitwise advisor, mentioned that Bitcoin futures put choice open curiosity quantity (OI) elevated considerably on the finish of December, and implied volatility returned to ranges seen earlier than the spot Bitcoin ETFs had been listed.
In line with information shared by Park, the $85,000 put place has the most important OI amongst Bitcoin choices expiring on December 26, at almost $1 billion. This determine surpasses the $620 million for $125,000 calls, $950 million for $140,000 calls, and $720 million for $200,000 calls for a similar expiration.
Park famous that Bitcoin has fallen greater than $40,000 within the final six weeks because of “ETF outflows, the Coinbase low cost, structural promoting, and liquidated lengthy positions,” whereas implied volatility has by no means exceeded 80% because the FTX crash in 2022. Park famous that volatility remained subdued for a very long time after ETF inflows peaked in March 2024, and that an upward development has re-emerged within the final 60 days.
In line with Park, essentially the most vital change just lately is the rise in implied volatility as Bitcoin’s worth declines. This correlation, uncommon within the post-ETF period, is interpreted as an indication that “the market might return to its previous Bitcoin volatility regime.” Moreover, the decline within the 30-day put skew to its lowest degree of the yr signifies elevated demand for defensive positions.
Park notes that year-end choices positions are dominated by name choices at complete par worth, with massive institutional traders nonetheless displaying curiosity in upside choices. Nonetheless, whether or not volatility continues to rise, whether or not ETF flows speed up once more, and the way IV reacts if the spot worth falls additional will decide the market’s course.
Park said that “it is too early to name for a definitive regime change but,” including {that a} downward development the place volatility continues to rise might pave the way in which for a robust worth bounce, but when volatility fades, the market might enter a extra pronounced bear development.
*This isn’t funding recommendation.
