Bitcoin Options Market Reacts To $100k Price Crash; Here’s What’s Happening

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Bearish sentiments continue to dominate the Bitcoin market as the leading cryptocurrency registered a decisive price break below the $100,000 psychological support zone. Following this highly volatile display, blockchain analytics firm Glassnode has noted the reaction of the BTC options market.

Bitcoin Traders Expect More Correction Ahead

The BTC options market allows traders to gain the right to buy or sell Bitcoin at a specific price or on or before a certain date. Options let traders hedge against risk, and bet on volatility, among other features, and thus are a good gauge of traders’ sentiment.

Notably, Bitcoin’s retest and fall below the $100,000 price mark were anticipated by the options market, which had been accumulating put options (BTC sell bets) as protection against bearish risk. Following this event, Glassnode notes that traders have reacted by now adjusting their positions based on higher uncertainty and fear of more downside.

In assessing several metrics that guide the options market, Glassnode notes that the ATM implied volatility is rising as the short-term market uncertainty trickles in. The 1-week IV now stands at 51% while the 6-month IV is 48% indicating that traders expect the next few days/weeks to be unstable. 

Meanwhile, the 25-delta skew, which compares demand for puts vs calls (upside bets), is strongly bearish as the 1-week and 1-month skew range around 12.4% and 10% respectively. For context, a positive skew means puts are more expensive due to high demand as traders are scared of more price drops.

The traders’ fear of further downside is also reinforced by data from the taker flow, which shows that recent flows over the past 24 hours have been dominated by put buys (38.8%). However, it’s worth noting that when dealers sell these puts, they hedge their risk by also selling BTC futures. As the spot price drops, the hedging continues, eventually creating a feedback loop that increases volatility and speeds up price decline.

Market Turns Focus On $95,000 Puts 

According to Glassnode, the price break below  $100,000 shifted option traders’ focus on the $95,000 puts, which have been heavily bid. However, while BTC still trades above this strike, the persistent demand signals expectations of further downside, as traders continue to accumulate protection against deeper losses.

At the time of writing, Bitcoin trades at $96,311 on the daily chart, reflecting a 3.86% loss in the past 24 hours. Meanwhile, trading volume is down by 12.46% and valued at $99.92 billion. 

Featured image from Flickr, chart from Tradingview

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