Earlier this week, the Bitcoin price gave a strong breakout all the way to $66,000 setting up the stage for a surge to new all-time highs. However, the derivatives data for Bitcoin options shows that there could be a short-term correction in BTC before resuming the uptrend.
Greeks.Live reports that 18,000 Bitcoin options are approaching expiration, featuring a Put Call Ratio of 0.63 and a Max Pain point of $63,000, with a total notional value of $1.2 billion.
This week saw significant inflows into the Bitcoin ETFs, driven by the Meme wave in the U.S., which propelled Bitcoin’s price above $65,000. However, the broader crypto market outside of the Meme phenomenon showed signs of weakness, with trading volumes continuing to decline. This trend is reflected in the divergence between Bitcoin and Ethereum options data.
On the other hand, CF Benchmarks’ analysis of Bitcoin (BTC) futures options traded on the Chicago Mercantile Exchange (CME) shows that investors continue to pay a premium for short-term downside protection, despite yesterday’s softer U.S. Consumer Price Index (CPI) inflation report.
According to CF Benchmarks analysts, Bitcoin saw a breakout above $66,000 following the inflation data release. However, higher implied volatility for out-of-the-money (OTM) put options compared to calls suggests that derivatives traders are paying elevated premiums for OTM puts. This indicates a bearish short-term market sentiment, with traders hedging against a potential decline in Bitcoin’s value.
In contrast to the short-term outlook, analysts noted a “flatter” volatility curve for longer-dated puts and calls, with a slight skew towards calls. This suggests that investors are more optimistic about Bitcoin’s long-term prospects. It will be interesting to see if this skew towards calls increases if disinflation expectations rise following the favorable CPI report.
CF Benchmarks’ analysis also observed that the relative flatness between longer-dated puts and calls for Bitcoin options might indicate increased institutional involvement, as these investors are typically less prone to extreme swings in sentiment.
As know, the Bitcoin futures trading platform CME Group is willing to provide spot trading to its users. The launch of Bitcoin spot trading on the CME would enable traders to capitalize on basis trades. This will also allow them to profit by exploiting the difference between futures prices and the underlying asset’s spot price.
Specifically the CME Group are looking at launching spot trading of #Bitcoin.
When taken together with their futures product it allows hedge funds to trade basis. (Short BTC + buy Spot for 20% APY)
In effect taking BTC long positions will get cheaper. https://t.co/MhLUWk4rro
— Willy Woo (@woonomic) May 17, 2024
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