As $10 billion in bitcoin options near expiry, the tell is in the pricing
Bitcoin (BTC) options traders are nervous.
The tell is in the pricing, which shows they are paying a clear premium for puts, which protect against a potential slide in the spot price of the largest cryptocurrency, which dropped to as low as $79,300 earlier this week.
"The break below $80,000 has pushed BTC's front-end 25-delta skew heavily toward puts at >10v over calls," Jean-David Pequignot, chief commercial officer at Deribit, told CoinDesk.
In other words, puts are 10 volatility points pricier than calls, which allow traders to profit from spot-price rises. Derivative traders typically discuss option values in terms of volatility rather than prices, and the signs suggest demand is for insurance against declines rather than speculation on gains.
Pequignot added that bitcoin’s short-dated options show a “pronounced smile” in implied volatility, with the downside side particularly in demand as traders “scrambled” for protection.
Deribit is the world’s largest crypto options exchange by bitcoin and ether trading volumes and open interest. On Deribit, one contract represents one BTC or ETH.
All this comes to the fore on Friday, when bitcoin options worth $10.86 billion will expire on the platform at 08:00 UTC. Ether options worth $783 million will also settle.
In bitcoin’s case, most open positions are stacked in calls at strikes from $90,000 to $100,000, suggesting traders positioned for a steep rise that didn’t materialize. These bets are now out of the money, or at a loss.
Deribit's BTC 30-day implied volatility index, DVOL, also shows traders anticipating near-term volatility after recent price action near $80,000 failed to establish much of a direction. The index currently sits at 36, which about five points above the 30-day realized volatility of 31.
"This positive Variance Risk Premium indicates that options are pricing in significant movements relative to recent realized chop," Pequignot said. Stay alert!
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today . For a comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead."
What’s trending
- NYSE owner takes steps to bring Hyperliquid perpetual futures to U.S. (CoinDesk): Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, is teaming up with Trade[XYZ], the largest builder of markets on decentralized exchange Hyperliquid, to bring perpetual futures to the U.S.
- AI found a way to crash bitcoin nodes on Windows and Macs. It's now public (CoinDesk): The flaw, initially flagged on Oct. 23, let any computer connected to a bitcoin node running Windows, macOS or BSD flood that node with data until it ran out of memory and crashed.
- Bitcoin drops to $80,000 on Fed dissent, Samsung, Alphabet earnings; AI tokens slump (CoinDesk): Bitcoin fell 1.4% to around $80,100 on Thursday. South Korea’s Kospi index led the selloff, tumbling by 1.2% as Samsung Electronics shares dropped 4%. Nasdaq-100 index futures fell 1.1% after Alphabet missed earnings expectations.
- European bonds and stocks rally; ECB meeting in focus as Lagarde confirms early exit (Reuters): Europe's government bond and stock markets rallied on Thursday as traders waited on the European Central Bank's decision later today.
Today’s signal
The chart shows daily swings in Solana's SOL in candlestick format since January.
The coin has pulled back to hover right around the $100 mark, revisiting a critical former resistance-turned-support level represented by the horizontal line at $98. This line marks a major breakout point from August, where prices originally signaled a fresh uptrend.
Holding this key psychological boundary is crucial to maintaining that bullish outlook. If the price drops below, it would imply a significant weakening of buying pressure, potentially opening the door for deeper losses.