As the value of Bitcoin (BTC) plummets, notable positioning has emerged within the choices market.
Jeff Park, chief funding officer at ProCap and Bitwise Advisor, mentioned open curiosity (OI) on Bitcoin futures put choices elevated considerably on the finish of December, with implied volatility returning to ranges seen earlier than the Spot Bitcoin ETF went public.
The $85,000 put place is the most important OI amongst Bitcoin choices expiring on December twenty sixth, at about $1 billion, in accordance with information shared by Park. This quantity is greater than $620 million for $125,000 calls, $950 million for $140,000 calls, and $720 million for $200,000 calls with the identical expiration date.
Park famous that whereas Bitcoin has fallen by greater than $40,000 previously six weeks because of “ETF outflows, Coinbase reductions, structural promoting, and lengthy place liquidations,” implied volatility has by no means exceeded 80% for the reason that 2022 FTX crash. Park famous that volatility has been subdued for a very long time after ETF inflows peaked in March 2024, and the uptrend has re-emerged in latest days. 60 days.
Based on Park, probably the most important latest change is the rise in implied volatility as the value of Bitcoin falls. This correlation, uncommon within the post-ETF period, has been interpreted as an indication that the market might return to the earlier Bitcoin volatility regime. Moreover, the 30-day put skew has fallen to its lowest stage this yr, indicating elevated demand for defensive positions.
Park notes that year-end possibility positions are dominated by name choices with gross par worth, and huge institutional traders stay fascinated with upside choices. Nonetheless, whether or not volatility continues to rise, whether or not ETF flows speed up once more, and the way IV reacts if spot costs fall additional will decide the path of the market.
“It is nonetheless too early to name for a definitive regime change,” Park mentioned, including {that a} downtrend with continued rising volatility might pave the best way for a robust rebound in costs, however as soon as volatility fades, the market might enter a extra pronounced bearish development.
*This isn’t funding recommendation.
