Bitcoin

BTC option traders do not expect Bitcoin prices to drop in the near future

Bitcoin’s (BTC) constant failure to exceed $ 9,400 levels in the past three weeks has prompted some analysts to be skeptical of the possibility of a positive breakout.

While $ 9,000 support has remained strong over the past 50 days, a slightly negative indicator tends to draw more attention from the media and experts.

The media recently reported on cryptocurrencies have focused on Bitcoin’s 25-day trend to prove that option traders become pessimistic in the short term. In reality, however, there is more than just the interpretation of signals from a data point.

BTC option traders do not expect Bitcoin prices to drop in the near future
BTC option traders do not expect Bitcoin prices to drop in the near future

Bias is an option trading concept that compares the volatility rates between put and call options within the same expiry date. A positive trend means that the implied volatility of put options is greater than that of call options. Indicates higher insurance costs for a downward movement in the price.

Investors can generally be seen as more pessimistic as downside protection is more expensive than upside protection. However, a more detailed analysis shows that this is currently not the case.

First, The current level is not invisible in history, it is the opposite.

The most common measurement is 25% delta, which is reflected in the price options with a probability of 25%.

Bitcoin options 25% delta offset

25% delta bias in Bitcoin options. Source: Skew

As shown in the graphic above, The 1-month delta 25% bias reached 23% on May 21, compared to the current 12%.

Meanwhile, 3-month options showed a similar move, with previous highs of 6% versus 4% today. In no way does the tendency indicate anything unusual or extremely bearish.

Regardless of whether the protection of the negative side is more expensive than the upper part, It has to be determined whether investors are actually buying these options.

Open positions for call options of up to 20% of the current price of $ 9,150 are measured and compared with those of put options of up to 20%.

Deribit July Bitcoin options open interest

Open interest in Bitcoin options in Deribit for July. Source: Deribit

Currently, the call options total up to $ 13,000 in BTC from a total of $ 13,000, slightly more than $ 12,000 in total sales, bringing the open positions for the term in July to $ 7,500 in BTC. For the following month The situation is even more prejudiced against the open interest of purchases of 18,000 versus mere sell options of 3.5,000.

This shows that not a lot of trading on the put side, in comparison with bullish call options. This relationship reduces the importance of the slope curve.

The futures market remains optimistic

Another way to measure the mood of professional investors It is about the premium of the futures markets in perpetuals and swaps. Long-term contracts tend to trade higher. This is a situation known as contango. an indication of a healthy market.

Bitcoin futures on an annual basis 3 months

Bitcoin futures annualized over 3 months. Source: Skew

The annualized 3-month premium was at a fixed level of 4%, the highest level in 30 days. Therefore, there are no signs of fear or downward-looking investors in the futures markets.

Be careful when reading signals and expert analysis

A single derivative indicator is unlikely to provide a complete picture of the market as the Bitcoin (BTC) options market remains a young industry. In addition, no exchange currently covers 80% of the open positions of BTC options.

The bias could also be caused by the current exposure of option market makers. You can not be interested when adding risk at the current level of implied volatility.

By measuring the open purchase / sales interest for each term You can better see professional investor bets, and maturities in July and August favor bullish positions.

A 25% delta slope alone should not be interpreted as a declining indicator. So be very careful with those who suggest otherwise.

The views and opinions expressed here are solely those of author and do not necessarily reflect Cointelegraph’s views. Every investment and business move involves risks. You should do your own research when making a decision.

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