Bitcoin options data indicates traders are not aggressively chasing new highs, showing demand for downside protection through put options.
Bitcoin BTC $111 177 24h volatility: 0.9% Market cap: $2.21 T Vol. 24h: $21.23 B price continues to extend its weekly gains beyond 10% hitting a fresh all-time high of $107,700 earlier today. Although BTC continues to smash new records, the options data shows that traders aren’t chasing new highs for the world’s largest asset.
Bitcoin’s rally following Donald Trump‘s victory in early November 2024 is unprecedented as investors remain hopeful of US building a strategic Bitcoin reserve. Several market analysts have given bold predictions expecting BTC to rally anywhere between $150K to $200K by the end of 2025.
However, the Bitcoin options data shows that traders aren’t actually chasing new highs for BTC. The derivatives data from the Deribit platform shows a more cautious outlook for Bitcoin in the short term.
At press time, the 25-delta risk reversal for options expiring this Friday was negative, reflecting the higher demand for put options that offer downside protection. Puts expiring on December 27 were priced at a slight premium over calls. On the other hand, risk reversals for options expiring at the end of March showed a modest call bias of under three volatility points
This shows a notable shift in the trends observed in recent weeks, where traders have been usually chasing new highs for BTC. They even pushed short-term and long-term call biases to over four or five volatility points. Short-term risk reversals often showed an even stronger call bias compared to their longer-term counterparts.
However, the recent block trades on Deribit reveal a bearish tilt. The largest trade today involved a short position in the $108,000 strike call expiring on December 27. Long positions follow this in $100,000 strike puts expiring on December 27 and January 3.
How Will Bitcoin Price React after FOMC Meeting?
The cautious sentiment among traders emerges from concerns over Wednesday’s Federal Reserve decision, wherein the US central banking is likely to announce a 25 basis points rate cut. It may also signal fewer or slower rate reductions for 2025.
Such an outcome could drive bond yields higher, strengthen the dollar, and undermine the appeal of riskier assets. Sophisticated BTC traders appear to be positioning for a potential market correction.
On the other hand, retail optimism for Bitcoin continues to remain high backed by institutional purchases coming from MicroStrategy. Furthermore, inflows into spot Bitcoin ETFs have continued at a strong pace with BlackRock’s IBIT crossing $36 billion in net inflows.
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