Bitcoin’s 6-Month ‘Put-Call Skew’ Flips Bearish for First Time Since May

Bitcoin’s six-month put-call skew, which measures the cost of puts – or bearish bets – relative to calls (bullish bets), has turned positive for the first time since the crash in May, indicating heightened concerns of an extended downside move.

• “People appear to be bidding for downside protection [put options],” Switzerland-based data tracking platform Laevitas said. “However, we haven’t seen significant volumes yet.”

• The six-month skew’s bearish turn does not necessarily imply a prolonged downtrend. With the six-month implied volatility hovering near its lifetime average of 84%, the longer duration put options appear cheap. So, traders could be buying those in a bid to make outsized gains on a potential sell-off.

• The one-week, one- and three-month put-call skews flipped bearish earlier this month.

• “We have seen demand for puts via risk reversals and outrights in the last week for both bitcoin and ether,” Patrick Chu, director of institutional sales and trading at the over-the-counter crypto trading firm Paradigm, told CoinDesk in a Telegram chat.

• “Demand for puts was particularly strong at the $50,000 strike [price] over the last week, with more than 2000 contracts exchanging hands,” Chu said.

• According to Delphi Digital, pricier put options indicate participants are hedging long positions in the spot market or speculating on deeper drawdown.

• Bitcoin fell more than 2% early today, hitting lows under $56,000 on concern over the spread of a new coronavirus variant. The cryptocurrency was last trading near $57,100, according to CoinDesk data.