Bitcoin's Put-Call Ratio Hits 6-Month High as Negativity Rules

The bitcoin marketplace appears plagued by negativity aft the cryptocurrency mislaid fractional its worth successful 2 1/2 months.

The cryptocurrency's put-call unfastened involvement ratio, which measures the fig of unfastened positions successful enactment options comparative to those successful calls, roseate to a six-month precocious of 0.62 connected Sunday, according to information provided by Skew. The ratio was 0.42 earlier this month.

"The put-call ratio suggests request for puts is presently high," said Patrick Chu, manager of organization income and trading astatine over-the-counter tech level Paradigm. "We person seen a batch of hazard reversal travel recently, wherever clients were buying puts/ selling calls."

Traders execute a bearish hazard reversal strategy by purchasing puts with little onslaught prices and selling higher-strike calls erstwhile anticipating a terms drop.

A enactment enactment gives the purchaser the right, but not the obligation, to merchantability the underlying plus astatine a predetermined terms connected oregon earlier a circumstantial date. A enactment purchaser is implicitly bearish connected the market, portion a telephone purchaser is bullish.

Given the extent of bitcoin's driblet from its Nov. 10 grounds adjacent $69,000 – it was trading precocious astir 2.6% down connected the time astatine $36,900 – accrued buying of puts is hardly surprising. It might, however, bespeak an excess of fear.

Traditional marketplace participants usually usage the ratio arsenic a contrary indicator, meaning a abrupt surge successful the metric is taken to correspond the utmost bearish sentiment that's often seen astatine the extremity of carnivore runs.

Other metrics similar the call-put skew, which measures the terms differential betwixt calls and puts, are besides exhibiting a enactment bias. The one-week, one-, three- and six-month skews each returned antagonistic values astatine property time, a motion puts were drafting higher prices than calls, according to information provided by Genesis Volatility.

"The skew is the absorption of the options premium," said Griffin Ardern, a volatility trader from crypto-asset absorption institution Blofin. "When the bearish sentiment is strong, the enactment enactment premium is more, and the options skew is negative. When the bullish sentiment is strong, the options skew is affirmative due to the fact that the telephone enactment premium is more."

While some the put-call unfastened involvement ratio and the skew bespeak the aforesaid thing, the second is much reliable, according to Ardern, fixed it calculates real-time information and is not affected by unfastened contracts. Historically, the six-month call-put skew has been much reliable arsenic a contrary indicator, showing enactment bias adjacent terms bottoms, arsenic observed aft the March 2020 clang and the May 2021 slide.