Bitcoin falls a day after options markets saw an increase in demand for lower strike options, or out-of-the money options at $22,000 and $20,000,000.
At press time, the leading cryptocurrency traded at a 3-week low of $30,000. This represents a 3.5% decline on the day. This decline has turned resistance to the critical 50-week simple moving mean (SMA) support level of $32,250.
500 contracts of the $22,000 option to purchase a put option on Sunday were transferred via the Paradigm institution-focused OTC desk. Similar volumes were recorded for the $20,000 option that expired on December 31.
QCP Capital’s CEO Darius Sit said that there was interest in buying December BTC puts in a substantial amount. “We created the market for the majority of large block trades during the weekend. There was also some interest in selling September BTC puts.
Market makers tend to be on the other side of investors/traders and maintain a neutral portfolio. This means that buyers of the $20,000 or $22,000 put expiring Dec. 31 were likely investors. They added downside hedges to long positions in spot/futures markets.
The buyer can purchase a put option that gives him the right, but not the obligation, to sell the underlying asset at a specified price. In this instance, a put buyer implicitly bears on the underlying asset.
The options market remains bullish over the long-term, overall. The six-month put call skew, which compares the cost of calls and puts, is still below zero. Puts are more expensive than calls of longer duration or bullish bets.
The one-week, three-month, and three-month put call skews indicate a negative bias with bearish prints.
Bitcoin is currently trading at the lower end in the two-month-long trading range between $30,000 and $40,000.
The support level of $30,000 may be broken. Traders who have sold puts at $30,000 in the last few weeks could resort to hedging, taking a short position on the spot or futures market. This can lead to a deeper fall.