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Bitcoin traded around $73,500 on Wednesday after five consecutive weekly losses, as options traders priced a 31% chance of a sub-$70,000 finish by Christmas, up from 15% a week earlier. The probability of a finish above $80,000 fell to 26% from 53%, according to Derive founder and CEO Nick Forster.
Why it matters
Traders are paying more for downside protection through puts than for equivalent upside exposure through calls, Forster said. Bitcoin options volume on Derive rose 37% to $418 million last week, with puts accounting for 55% of premiums traded, up from 36% the prior week.
The defensive positioning comes alongside heavy ETF withdrawals. U.S. spot Bitcoin ETFs recorded $1.28 billion in net outflows last week, followed by another $296 million on Monday and Tuesday. The funds also turned negative for the year.
Market impact
Perpetual futures open interest stood at around 353,000 BTC on Tuesday, a level exceeded on only 1.2% of trading days over the previous two years, according to K33. Open interest rose 12% over 30 days while Bitcoin lost 10%.
K33 research head Vetle Lunde said a breakdown could trigger substantial long liquidations, while a recovery could force short covering. More than $1 billion in crypto long positions were liquidated on Monday as Bitcoin fell below its 50-week moving average.
Bitcoin also dropped below $74,000 on Tuesday after October U.S. consumer prices rose 0.4% against expectations of 0.3%. K33 put Bitcoin's 30-day correlation with the Nasdaq at 0.75, in the 99th percentile since 2020.
Frequently asked questions
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How have Bitcoin's Christmas price probabilities changed?
The probability of a finish below $70,000 rose to 31% from 15% a week earlier, while the chance of a finish above $80,000 fell to 26% from 53%.
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What do Bitcoin options premiums suggest about trader positioning?
Derive CEO Nick Forster said downside protection through puts costs more than equivalent upside exposure through calls. Puts accounted for 55% of premiums traded on Derive last week, up from 36%.
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How much money left U.S. spot Bitcoin ETFs?
The funds recorded $1.28 billion in net outflows last week, followed by another $296 million on Monday and Tuesday. They also turned negative for the year.
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Why does K33 see squeeze risk in Bitcoin futures?
Perpetual futures open interest stood at around 353,000 BTC, a level exceeded on only 1.2% of trading days over the prior two years. K33 said a drop could trigger long liquidations, while a recovery could force short covering.
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How closely was Bitcoin trading with the Nasdaq?
K33 put the 30-day correlation between Bitcoin and the Nasdaq at 0.75, a reading in the 99th percentile since 2020.
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