• Bitcoin prices have fallen below $21,000 and options traders are signaling a bearish outlook on the near-term price.
• The 25% delta skew of Bitcoin options expiring 7 days from now has fallen to its lowest level since late December 2022.
• Investors remain fairly sanguine on price volatility risks with implied volatilty staying broadly unchanged over the last month and Deribit’s Bitcoin Volatility Index (DVOL) at 49.
Bitcoin Prices Drop Below $21K
Bitcoin prices have taken a hit in recent days, slipping below the $21,000 level as traders mull headwinds including a growing liquidity crisis amongst major crypto-friendly banks and ongoing macro headwinds as the US Federal Reserve signals risks. BTC/USD was last trading in the $20,700s, lower by over 5.0% in the last 24 hours according to CoinMarketCap and now down roughly 18% from earlier yearly highs in the low-$25,000s.
Options Market Showing Bearish Sentiment
In wake of Bitcoin’s latest slide, Bitcoin options have turned their most pessimistic on the cryptocurrency’s near-term price outlook this year. The 25% delta skew of Bitcoin options expiring 7 days from now fell to around -6, the lowest since late December 2022. This suggests that desks are charging more for equivalent call options versus puts and there is higher demand for calls versus puts which can be interpreted as a bullish sign as investors are more eager to secure protection against (or bet on) a rise in prices.
Longer-Term Price View Holding Steady
The 25% delta skew of options expiring in 30-days and 60-days also fell to their lowest levels of the year of around -3 and -2 respectively; however, other longer term measures such as those expiring in 90 and 180-days have been holding up relatively well with both remaining close to zero suggesting that investors believe current headwinds are unlikely to send Bitcoin lower on a sustained basis from current levels.
Volatility Risks Remain Sanguine
Options markets are also sending signals that Bitcoin investors remain fairly sanguine on price volatility risks with Implied Volatiltiy according to At-The-Money (ATM) options expiring in 7, 30, 90 and 180-days staying broadly unchanged over recent weeks while Deribit’s Bitcoin Volatility Index (DVOL) remains at 49.
Conclusion
All things considered it appears that while traders may be cautious about short term prospects for bitcoin prices due to current macroeconomic headwinds they still remain confident about its long term prospects despite short term dips or corrections.