Crypto Crash Imminent, How Traders Are Protecting Themselves

The cryptocurrency market continues to stay sluggish due to the hawkish stance of the Federal Reserve. Bitcoin continues to be stuck in the $18K-$19K range. According to Jason Goepfert, a major crypto influencer, the retail traders are expecting a full-on crypto crash.

According to Goepfert, the retail investors spent close to $20 billion last week to buy put option protections. He reveals this to be a record high.

Jason reveals that leveraged traders are expecting a crypto crash to be imminent.

Why A Crypto Crash Is Almost Certain

The Federal Reserve has taken an extremely aggressive stance to curb soaring inflation in the economy. They are also engaging in quantitative tightening to offload their balance sheets which ballooned during the pandemic. The Fed has increased the interest rates by 75 bps thrice in a row. Even bullish members of the market expect a 100 bps hike before the end of the year.

Meanwhile, recession warnings are being echoed all across the market. The World Bank believes that the global economy will suffer from a recession next year. FedEx gave a dire warning that the demand slowdown has accelerated. If Fed chair Jerome Powell follows the footstep of his predecessor Paul Volcker, the economy will indeed step into a recession.

How Crypto Traders Are Protecting Themselves

Retail traders spent a record high on buying put options.  A put option gives the investors the right but not the obligation to sell a certain asset. It is considered a negative sentiment for the value of the underlying asset. Traders have also invested a record high $46 billion in index futures net short.

However, not everyone shares their sentiment. Michael van de Poppe, a major crypto analyst and the CEO of Eight Global, believes that a short squeeze is coming. A short-squeeze is a scenario when a shorted stock surges and forces the short sellers to sell their position at a loss. Poppe believes that a crypto rally is imminent.