Following a significant rise in cryptocurrency prices last month, the market has calmed down, and investors have begun to open put options on Bitcoin and Ethereum.
Popularity of Put Options on Bitcoin and Ethereum
According to data from the Derive.xyz platform, there has been a notable increase in the number of put options opened for Bitcoin (BTC) and Ethereum (ETH) on August 29. This suggests that investors are anticipating a decline in prices in the coming days. According to market update shared by Dr. Sean Dawson, Head of Research at Derive, put positions are almost five times larger than call positions for Bitcoin. The main levels around $95,000, $80,000, and $100,000 indicate that investors seriously expect Bitcoin to fall below $100,000 again.
Decline in Option Skew and Increase in Volatility
Derive reported that the option "skew" for Bitcoin has fallen from +2 to -2, and for Ethereum from +6 to -2 over the past month. This indicates a growing need for downside protection. Monthly implied volatility for Bitcoin is currently around 35%, while for Ethereum it has reached 65%. Since the beginning of June, the volatility gap between these two assets has widened from 24 points to 30 points.
Probability Estimates for Price Changes
Despite hedging against downturns, platform estimates show a mixed picture. Derive estimates a 25% chance of Ethereum falling below $3,000 by the end of August, and a 30% chance of it rising above $4,000. Bitcoin has an 18% chance of testing the $100,000 level again by the end of the month.
With the increase in put options on Bitcoin and Ethereum, investors are displaying caution and expectations regarding potential price declines. Key price levels and probabilities of changes indicate rising volatility and theoretical expectations.
