Bitcoin in Decline: Options Traders Gear Up

Bitcoin continues its downward movement and triggered one of the largest liquidation events of the year on Monday. Although the leading cryptocurrency's loss was less than 4%, the crash resulted in immense liquidation volumes: $1.65 billion in long positions and $145 million in short positions were liquidated. Despite the dramatic scale of this crash, the implied volatility, an indicator of the future expectations of options traders, remains largely unchanged and shows no signs of unrest, as Adam Chu, senior researcher at GreeksLive, explains. Nonetheless, the increased demand for put options indicates that markets continue to expect falling Bitcoin prices. Experts report a heightened need for put options as concerns about further price volatility loom over the market. Sean Dawson, head of research at the platform Derive, explains that the current market situation implies a short to medium-term downward trend. This is also reflected in the put-call delta skew, which has reached its highest level since August. The concern about a "sell-the-news" sentiment due to the highly anticipated interest rate cut by the Federal Reserve further contributes to the current market situation. While the S&P 500 and gold recorded gains of 3.68% and 12.41% respectively, Bitcoin and Ethereum stand out with negative returns. However, the market is optimistic for the fourth quarter, and initial signs of a tentative revival are visible. Dawson shares this positive outlook and expects a medium-term upward trend in prices. He expects a faster recovery for Ethereum compared to Bitcoin due to the positioning of market makers who may be forced to buy Ethereum because of their downside risks.