ETC Group analyst: Bitcoin volatility term structure inversion indicates extremely bearish signal in options market

BlockBeats news, July 8, according to The Block, analysts said that with the recent price correction of Bitcoin, traders' demand for downside protection has increased, which is reflected in the increase in the number of put options.

According to Deribit data, the put/call ratio of open interest in Bitcoin options expiring on Friday has risen to above 1, which is regarded as a bearish signal in the market. A ratio of more than 1 means that the number of put options traded is significantly greater than that of call options. This indicates that more investors are betting or hedging against falling prices rather than rising prices.

"The increase in open interest in Bitcoin options is mainly due to an increase in relative put option open interest, which is consistent with the recent price correction of the asset as Bitcoin options traders increase their downside bets and hedges. The surge in the put/call option volume ratio and the one-month 25-Delta option skew indicate that the demand for downside protection has increased significantly," ETC Group wrote in the report.

The report also noted that the implied volatility of Bitcoin options has increased during the recent decline, and the implied volatility of one-month at-the-money Bitcoin options is currently around 50.5%. "The term structure of volatility is now also inverted, with the implied volatility of short-term options significantly higher than that of long-term options, which is often a sign of extreme bearishness in the options market," added ETC Group analysts.