This is an excerpt from CoinDesk newsletter 'Daybook.'
With bitcoin BTC$62,874.60 and the broader crypto market showing signs of life, defensive positioning in the market has eased, not disappeared, a sign of continued caution.
This is evident from the BTC and ether (ETH) options markets listed on Deribit, where put options, derivative contracts offering protection against price slides, continue to trade at a premium to calls, or bullish contracts.
Bitcoin's one-week, 25-delta put-call skew, which measures the difference in volatility for puts relative to calls, was around 16%. It showed puts outpacing demand by a 16% vol point premium. That’s still notably elevated, though significantly lower than the 25% of 10 days ago, according to data source Velo.
The one-, three-, and six-month skews also show put premiums of around 10% or more. The same is true for ether.
The message is clear. Downside fears persist, keeping demand for insurance against price declines intact even though BTC long-term holders and ETF investors appear to have returned to accumulation.
Besides, some of the largest block flows in options still point to range-bound positions rather than bullish expectations. Consider block flows, trades that are negotiated over the counter and then listed on the exchange. These typically involve institutions and large traders seeking privacy for their transactions.
According to Laevitas, one of the big flows has been a long call condor on BTC. The strategy involved long positions in July 17 expiry calls at the $64,000 and $70,000 strikes and short positions in the same expiry calls at $66,000 and $68,000. This strategy makes the most money if, on July 17, BTC trades between $66,000 and $68,000.
The U.S. markets are closed Friday on account of the Independence Day weekend. Liquidity is likely to be thin during the extended weekend, which may lead to erratic moves. Stay alert!
