Bitcoin options show increased caution as $100K remains elusive

Bitcoin, the largest cryptocurrency, has reversed course after flirting with the $100,000 mark.

The digital asset reached an all-time high of $99,830 on November 22 but has since dropped over 8% to $91,377.32 as of Tuesday.

As of 11:48 am IST on Wednesday, BTC stood at $93,099, according to CoinGecko.

The downturn comes despite a stellar 120% rise in 2024, with gains fuelled by bullish market sentiment following Donald Trump’s presidential election victory.

Trump’s pro-crypto stance, including pledges to make the US a global cryptocurrency leader and amass a national bitcoin stockpile, has played a pivotal role in driving demand.

Investors shift focus to protective strategies

Market activity points to heightened caution among bitcoin investors.

Nick Forster, founder of Derive, an on-chain options platform with $7.1 billion in total trade volume, noted a significant shift in sentiment.

The call-put skew index for December 27 bitcoin options expiry dropped 30% in the last 24 hours, signalling an uptick in protective hedging.

“The decline in skew reflects traders hedging against potential downside risks,” Forster told Reuters.

While calls—options to buy bitcoin—still outnumber puts—options to sell—the trend suggests a cautious market, likely spurred by bitcoin’s sharp pullback from its peak.

Major price movements expected around options expiry

The December 27 expiry of $11.8 billion in bitcoin options could act as a catalyst for substantial price movements.

According to Forster, there is a 68% probability that bitcoin will move 16% lower to $81,493 or 20% higher to $115,579 by this date.

Extreme scenarios include a 29.5% decline to $68,429 or a 41.8% rally to $137,645, though these outcomes have only a 5% probability.

Notably, data from Derive shows a 45% chance of bitcoin hitting $100,000 again, with a 4% chance of exceeding $150,000.

Profit-taking drives selling pressure

Profit-taking by long-term holders is adding to bitcoin’s recent sell-off.

Analysis from _checkonchain.com reveals that $60 billion worth of bitcoin supply has been distributed in the past 30 days.

Since bitcoin’s low of $15,479 during the FTX collapse two years ago, long-term holders have moved 21% of their supply this November, marking the heaviest profit-taking in this cycle.

Anthony Pompliano, founder of Professional Capital Management, cited this data in a letter to clients, underscoring its impact on market dynamics.

Despite recent declines, bitcoin’s volatility metrics remain stable, suggesting the market is bracing for further swings.

The cryptocurrency’s seven-day implied volatility stands at 63%, closely aligned with the 30-day level of 55%.

“This close alignment indicates traders are expecting significant price movements soon,” Forster added.