Bitcoin Options Bearish on Near-Term Prices as Prices Slump Towards $20K

• Bitcoin prices have dropped below the $21,000 level as traders consider headwinds such as a liquidity crisis amongst major crypto-friendly banks and continued macro pressures from the US Federal Reserve.
• The 25% delta skew of Bitcoin options expiring 7 days from now has fallen to its lowest levels of the year, implying that investors are bearish on near-term BTC outlook.
• However, longer-term options skew and implied volatility remain relatively unchanged, suggesting that investors remain sanguine on price volatility risks.

Bitcoin Prices Slide Below $21K

Bitcoin’s price has been in decline lately, dropping below the $21,000 mark on Thursday. Traders are mulling over various headwinds including a growing liquidity crisis amongst major crypto-friendly banks and ongoing macro headwinds as the US Federal Reserve signals risks.

Options Market Turns Most Bearish

In wake of this slide, Bitcoin options have turned their most pessimistic on the cryptocurrency’s near-term price outlook this year. The 25% delta skew of Bitcoin options expiring 7 days from now fell to around -6, which is the lowest since late December 2022. This implies that there is higher demand for calls versus puts; meaning investors are more eager to secure protection against (or bet on) a rise in prices.

Longer Term Price View Holding Firm

Despite the drop in near-term sentiment indicated by option markets, those expiring further out seem to suggest investor sanguinity towards BTC’s future prospects. The 25% delta skew of options expiring in 30-days and 60-days also fell to their lowest levels of the year but still remain close to zero. Similarly, Implied Volatiltiy according to At-The-Money (ATM) options expiring in 7, 30, 90 and 180-days have also been largely unchanged over recent weeks. Deribit’s Bitcoin Volatility Index (DVOL) also remains stable at 49%.

Macro Headwinds

Adding further pressure on BTC is an increasing scrutiny by US regulators as well as continued tightening efforts by the Fed which could potentially send prices lower on a sustained basis from current levels. Nevertheless it appears investors are still optimistic about longer term prospects despite short term concerns given how bullish they remain when it comes to implied volatilities and option skews beyond just seven days out into 2021.

Conclusion

In conclusion while investors seem bearish on near term outlook of BTC due to various macro headwinds they still appear optimistic about its longer term prospects given how bullish their attitude remains towards implied volatilities and option skews beyond just seven days out into 2021