Bitcoin Futures and Options expiring: bearish sentiment

Bitcoin Options expiring

Today, major Bitcoin and crypto derivatives exchanges will settle expiring Futures and Options this month.

Bitcoin Futures and Options expiring

The reason is that put Options on BTC are becoming more expensive, and since they are often used as protection against possible price declines, their appreciation implies bearish sentiment among Bitcoin traders.

Volatility is expected to increase later today due to the expiration of these Options. As many as 51,900 contracts expire for a total value of nearly $3 billion. On Deribit alone, $2.5 billion worth of Options are expiring.

The bearish sentiment is evidenced by the three-month put-call skew index, which measures the cost of puts relative to calls. Not only has it turned positive, but it has reached its highest level in six weeks.

This means that put (i.e. sell) Options are currently in greater demand than call (i.e. buy) Options. It is enough to consider that at the beginning of the month this indicator was at -5%, while now it is at 3%.

In recent days, the trend has been similar for the one-week and one-month put-call indexes. The six-month put-call index has become neutral.

It is worth mentioning that another reason could be the fact that many traders prefer to use Options to hedge downside risks after opening long positions in the spot or Futures market.

Bitcoin investors are bearish

The impact of Fed policies

It is possible that this increase in bearish sentiment could be linked to the strength of the US dollar and the Fed’s monetary policy. 

Indeed, with inflation seemingly on the rise again, speculation is beginning to emerge that the US central bank may end its stimulus programme more quickly, either by reducing asset purchases in the financial markets earlier than expected with money created out of thin air or by raising interest rates.

In fact, the Fed has already begun tapering, but fears are now turning to an acceleration of the reduction in stimulus. Paradoxically, this could keep the dollar strong in the short term, limiting Bitcoin’s growth potential.

Bearish sentiment

It is also worth adding that in the US it is the weekend of the Thanksgiving holiday, which could drastically reduce trading volumes in the financial markets. In such situations, it is entirely possible to experience an increase in volatility.

However, while in the middle of the month the general sentiment seemed decidedly bullish, though without the price of Bitcoin rising, now that it is turning bearish it is by no means impossible that the price will once again disappoint expectations.


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