Savvy Bitcoin and Ether traders are shoring up their defenses as the broader market continues to foresee bullish price action over the summer. This sentiment is reflected in the use of an options-based strategy called the 25-delta risk reversal, which typically involves the simultaneous purchase of a put option while selling a call option, or vice versa.
Currently, risk reversals based on Deribit-listed Bitcoin and Ether options indicate that investors are positioning themselves for potential downside volatility in the months ahead. As we look toward June, July, and August, Bitcoin’s 25-delta risk reversals are predominantly negative, suggesting a preference for put options—those that offer downside protection—over call options, which represent bullish bets. This is according to data from Amberdata. For Ether, put options are also commanding a higher price up until the July expiry, indicating a similar trend among traders seeking security against market fluctuations.
Traders often invest in put options as a way to hedge their long positions in both the spot and futures markets, safeguarding against potential price declines during volatile periods. “Risk reversals in both BTC and ETH continue to show a preference for downside protection across June and September tenors,” noted Singapore-based QCP Capital in a recent market note. This activity suggests that long holders are actively hedging their spot exposure, indicating a readiness for possible drawdowns in price.
This nervousness around potential market shifts is further supported by data from the over-the-counter liquidity platform Paradigm, where the top five Bitcoin trades for the week featured a put spread and a bearish risk reversal. In the case of Ether, notable activity included a long position on a $2,450 put alongside a short strangle, a strategy indicating volatility in the market.
Bitcoin, currently the leading cryptocurrency by market value, has spent over 40 days fluctuating around the $100,000 mark, according to CoinDesk data. Analysts have noted that profit-taking by long-term holders, coupled with miner selling, has counteracted the robust demand for spot ETFs, leaving prices somewhat directionless. “Bitcoin has recently tracked sideways, suggesting its current price may be too high for many retail investors,” noted Coinbase Institutional’s weekly report.
Open interest in Bitcoin options has indeed risen, showcasing a positive and growing 25-delta put-call skew on 30-day contracts. This trend implies that market participants are becoming increasingly cautious and are actively seeking short-term protection through put options. As of last Friday, Bitcoin closed below its 50-day simple moving average (SMA) for the first time since mid-April. This breakdown could trigger more chart-driven selling, pushing prices closer to a significant drop below the $100,000 threshold.
However, some market observers remain optimistic, expecting a potential rally to new record highs. Notably, market analyst Cas Abbé has pointed out that Bitcoin’s on-balance volume still indicates strong buying pressure, hinting that prices could rise to a range of $130,000-$135,000 by the end of Q3.
