Bitcoin options indicate increasing caution: Will the price of BTC return to $110,000?

Bitcoin was unable to regain the 115,500 USD mark on Monday, amid a significant increase in bearish hedging demand through options. This move opens up opportunities for the bears to push the price below the 112,000 USD threshold, despite the cause potentially stemming from uncertainties surrounding global trade tensions.

The put-call ratio (premium) of Bitcoin options at Deribit | Source: laevitas.chUnder normal market conditions, put options (put) typically have about 50% lower demand compared to call options (call), reflecting the prevailing optimism among cryptocurrency investors. However, the put/call ratio has now increased to 90%, indicating a shift towards defensive and neutral strategies. Notably, this index has surpassed 100% over the last two weekends – an extremely rare level, reflecting a marked sense of concern.

30-day Bitcoin options are skewed (sell-buy) at Deribit | Source: laevitas.chThe increase in demand for risk protection has caused put options to be traded at a higher premium than call options – an unusual phenomenon. In a healthy market, the skew index typically fluctuates between -6% and +6%. The fact that this index has hit +7%, the highest in four months, indicates that investors are willing to pay more to hedge against negative price shocks.

Do not rush to conclude that the market is bearish

Although these indicators may seem negative at first glance, they do not necessarily reflect expectations of a strong bearish trend. Risk hedging can stem from various external factors, particularly in the context of economic instability such as import tariffs or concerns about overconcentration in AI tech stocks – notably Nvidia (NVDA) and Microsoft (MSFT), which are currently the two largest companies by market capitalization.

Disappointing business results from many traditional enterprises have also contributed to an increased defensive sentiment. Caterpillar (CAT) is expected to suffer a loss of 1.5 billion USD due to import taxes. Saudi Aramco – the world's largest oil producer – reported a quarterly profit decrease of 19% compared to the same period last year. Kimberly Clark (KMB), the maker of Kleenex tissues, lowered its profit forecast due to an additional 300 million USD in import tax costs. Carrier Global (CARR) also cut its outlook for the year, while UPS reported a 3% drop in revenue.

Signals from U.S. government bonds indicate an increased risk-averse sentiment

Although capital inflows into the AI sector remain strong, a cautious sentiment is dominating the market as investors reduce exposure to risky assets. The yield on the 10-year U.S. government bond has fallen from 4.32% to 4.21% in just one week – a clear sign that investors are willing to accept lower yields in search of safety.

However, data from the Bitcoin futures market indicates that the level of pessimism is still under control. The price difference for the monthly BTC contract currently maintains at 7% – within the neutral zone of 5% to 10%. Even if the price of Bitcoin returns to test the threshold of 112,000 USD on Sunday, this indicator remains stable, showing that long-term buying pressure is still consistent.

Annual premium for 2-month Bitcoin futures | Source: laevitas.chIn summary, although macro pressures are driving the demand for hedging through BTC options, there is currently no clear evidence that institutional investors are betting on a deep fall to 110,000 USD. The market remains balanced amid significant global volatility.

Mr. Teacher