• Bitcoin’s price has dropped below the $21,000 level as traders face liquidity crisis and macro headwinds.
• Bitcoin options have turned their most pessimistic on the cryptocurrency’s near-term price outlook this year.
• Options markets are also sending the message that Bitcoin investors remain fairly sanguine on price volatility risks.
Bitcoin Price Drops Below $21K
Bitcoin’s price has dropped below the $21,000 level as traders face liquidity crisis and macro headwinds from the US Federal Reserve signaling risks.
Most Pessimistic Yearly Outlook for Bitcoin Options
Bitcoin options have turned their most pessimistic on the cryptocurrency’s near-term price outlook this year with 25% delta skew of Bitcoin options expiring 7 days from now on Thursday falling to around -6, the lowest since late December 2022. Put options give an investor the right but not the obligation to sell an asset at a predetermined price, while a call option gives an investor the right but not the obligation to buy an asset at a predetermined price. A 25% delta options skew above 0 suggests that desks are charging more for equivalent call options 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 Firm
The 25% delta skew of options expiring in 30-days and 60-days have also fallen to their lowest levels of the year of around -3 and -2 respectively, however,the 25% delta skew of options expiring in 90 and 180-days have been holding up close to zero suggesting that investors believe current headwinds faced by the market are unlikely to send Bitcoin lower on a sustained basis from current levels.
Sanguine Attitude Towards Price Volatility Risks
Implied Volatiltiy according to At-The-Money (ATM) options expiring in 7, 30, 90 and 180-days are broadly unchanged over the course of last month; meanwhile Deribit’s Bitcoin Volatility Index (DVOL) is also broadly unchanged versus recent weeks at 49.
Conclusion
Overall it appears that despite recent drops in bitcoin prices due to external factors such as liquidity crises amongst major crypto friendly banks and regulatory scrutiny from US regulators; bitcoin investors still remain relatively confident with regards to both short term and longer term prospects with some hedging against potential downside risk via put/call option strategies while remaining relatively sanguine towards volatility risks