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Bitcoin Options Market Isn't Buying BTC Price Weakness, Shows Bias for $100K Calls

source-logo  coindesk.com 21 June 2024 07:28, UTC

Options market shows bias for calls even as BTC's price continues to drop.

Demand for calls at $100K suggests traders preparing for a renewed rally into 2025, according to one trading firm.

Crypto options traders are strategically placing bets that diverge from the ongoing downtrend in bitcoin's (BTC) price.

In the past 24 hours, the leading cryptocurrency by market value has declined over 1% to $64,500, extending the pullback from recent highs near $72,000, CoinDesk data show.

Still, the flow in bitcoin options listed on leading exchange Deribit has been biased toward call options at levels (strikes) well above the cryptocurrency's going market rate, perhaps a sign sophisticated investors expect the ongoing price weakness to set the stage for a more extensive run higher.

In the options market, we observed an abnormally large buying flow of Dec and Mar [expiry] $90-$100K calls in the last 24 hours. We believe this suggests the market is calling the bottom and positioning itself for a sustained rally, possibly last into 2025," Singapore-based QCP Capital said in a market update.

A call option gives the purchaser the right but not the obligation to buy the underlying asset, BTC, at a predetermined price at a later date. A call buyer is implicitly bullish on the market.

The chart shows the most active bitcoin options on Deribit over the past 24 hours. The activity has been mostly concentrated in June expiry calls at $65,000, $68,000, and $70,000, July expiry call at $110,000 and December expiry call at $95,000.

The divergence in options market sentiment and bitcoin's price is more strongly evident in the call-put skew, which indicates what traders are willing to pay to acquire an asymmetric payout in the upward or downward direction.

Per Amberdata, the one-, two-, three-, and six-month skews have held consistently positive through the recent BTC price pullback, suggesting a bias for calls or upside. Only the seven-day skew has flipped negative, signaling demand for downside protection.

Bitcoin has decoupled from Nasdaq's uptrend in recent weeks, largely due to long-term holders and miners selling coins and growing chatter about the non-directional nature of the ETF inflows. On Thursday, the German government moved BTC worth $425 million to some cryptocurrency, likely with the intention of selling.