Bitcoin’s options market has flipped bearish for the short term, as demand rises for ways to hedge against further sell-offs in the spot market.
The top cryptocurrency by market value fell to $17,640 earlier Wednesday, the lowest since Nov. 29. Prices later rebounded somewhat and bitcoin was last seen changing hands near $18,300, according to CoinDesk 20 data.
Prices have declined by $1,000 in the past 24 hours, taking out crucial technical levels and triggering fears of a deeper decline in the short run. That’s evident from the increased demand for put options highlighted by a positive turn on the one-week put-call skew.
The gauge measuring the value of short-dated puts relative to calls has risen from -0.20% to 15% in the past 24 hours, according to data source Skew. Essentially, short-dated puts are now drawing higher demand (or prices) than calls. The one-month put-call skew has also recovered from -21% to -7%, again reflecting a pick up in the hedging demand for puts.
The majority of the activity has been concentrated in $17,000 puts, and $15,000 puts expiring this month.
“Over 300 contracts of $17,000 put with a notional value of more than $5 million have been traded on Deribit since midnight UTC,” said Shaun Fernando, head of risk and product at Deribit, the biggest crypto options exchange by volume and open interest.
According to Matthew Dibb, CEO of Stack Funds, put options at $15,000 and $16,000 strikes have also seen increased purchases over the past week. “Investors appear to be hedging before the year is out,” he said.
However, the three- and six-month skews remain…
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