Despite Bitcoin hitting new all-time highs, the options market shows a more cautious sentiment, suggesting traders are not as aggressively chasing the rally as they have in the past.
On Monday, Bitcoin surpassed $107,000, breaking its previous peak from December 5 and marking a post-U.S. election surge of over 50%, according to CoinDesk data. The rally follows President-elect Donald Trump’s statement on the U.S. creating a Bitcoin strategic reserve, similar to the nation’s oil reserve. Analysts forecast that Bitcoin’s price could continue its upward trajectory into next year, possibly reaching between $150,000 and $200,000 by 2025.
However, the options market paints a different picture. Data from Deribit shows that traders are not showing the same level of enthusiasm. The 25-delta risk reversal for options expiring this Friday is negative, indicating that put options are in higher demand than calls, suggesting a greater desire for downside protection. Additionally, puts expiring on December 27 are trading slightly above calls, while the longer-term risk reversal through March has a mild call bias of just three volatility points.
This is in contrast to recent weeks when traders were buying calls aggressively, pushing short- and long-term call biases to levels above four or five volatility points. The current data suggests a more balanced and cautious outlook for Bitcoin’s price in the short term.
Block trades tracked by Amberdata further reveal a bearish tone. The largest trade of the day involved a short position on a $108,000 strike call expiring on December 27, along with long positions on $100,000 strike puts expiring in December and early January.
This shift in market sentiment could be attributed to expectations that the Federal Reserve may signal slower or fewer rate cuts for 2025, despite an anticipated 25 basis point reduction. A stronger dollar and rising bond yields could dampen the appeal of riskier assets like Bitcoin, leading some traders to hedge against a potential price correction.
