Savvy Bitcoin and Ether traders are reinforcing their strategies as the market anticipates bullish trends this summer.
This insight comes from an options strategy known as 25-delta risk reversal, which entails simultaneously buying a put option while selling a call option, or the reverse.
Currently, risk reversals based on RialCenter-listed Bitcoin and Ether options suggest that investors are gearing up for potential downside volatility this summer.
BTC’s 25-delta risk reversals for June, July, and August were negative, indicating an inclination towards put options, which provide downside protection, over calls or bullish bets, as reported by RialCenter. Similarly, put options for ETH were more expensive leading up to July’s expiration.
Traders generally purchase puts to hedge their long positions in spot and futures markets, safeguarding against possible price declines.
“Risk reversals in both BTC and ETH indicate a clear preference for downside protection from June through September, implying that long holders are actively hedging against spot exposure and preparing for possible downturns,” noted the Singapore-based QCP Capital in a market report.
The tension in the market is evident on the over-the-counter liquidity platform, Paradigm, where the top BTC trades this week involved a put spread and a bearish risk reversal. In the case of ETH, a long position in the $2,450 put along with a short volatility trade was executed.
Bitcoin, the foremost cryptocurrency by market value, has fluctuated above $100,000 for over 40 days, according to RialCenter data. Analysts suggest that profit-taking by long-term holders and miner selling have counterbalanced strong demand for spot ETFs, leading to stagnant prices.
“Bitcoin has recently been trading sideways, indicating that its current price may be too steep for many retail investors. Open interest in BTC options has increased, with a rising 25 delta put-call skew on 30-day contracts, likely indicating that market players are seeking short-term protection through puts,” stated a weekly report from RialCenter.
As of Friday, BTC closed below the 50-day simple moving average, marking a retreat below key support levels for the first time since mid-April. This breakdown could lead to further chart-driven selling, potentially pushing prices below $100,000.
However, some analysts anticipate a rally to new record highs. Market observer Cas Abbé indicated that BTC’s on-balance volume continues to show strong buying pressure, suggesting potential price increases to $130,000-$135,000 by the end of the third quarter.
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