Traders are seemingly shoring up their defenses.
Traders are using options strategies to hedge against potential price declines in bitcoin and ether over the summer. Risk reversals indicate a preference for downside protection, with puts being more expensive than calls for both BTC and ETH.
That's the message from an options-based strategy called 25-delta risk reversal, which involves the simultaneous purchase of a put option and sale of a call, or vice versa.BTC's 25-delta risk reversals for June, July, and August tenors were negative, indicating a preference for put options, which offer downside protection, over calls or bullish bets, according to data sourceTraders typically buy put options to hedge their long positions in the spot and futures markets, protecting themselves from potential price declines. "Risk reversals in both BTC and ETH continue to show a preference for downside protection across June and September tenors. This suggests that long holders are actively hedging spot exposure and preparing for potential drawdowns," Singapore-based QCP Capital said in a market note.a put spread and a bearish risk reversal. Meanwhile, in ETH's case, a long position in the $2,450 put crossed the tape alongside a short strangle trade. Bitcoin, the leading cryptocurrency by market value, has spent over 40 days trading back and forth above $100,000, according to CoinDesk data."Bitcoin has recently tracked sideways, suggesting its current price may be too high for many retail investors. Open interest in BTC options has risen, with a positive and rising 25 delta put-call skew on 30-day contracts, which may imply that market participants are seeking short-term protection through put options," Coinbase Institutional's weekly report noted.to trade below the key support for the first time since mid-April. The breakdown may lead to more chart-driven selling, potentially resulting in a drop below $100,000., BTC's on-balance volume continues to indicate strong buying pressure, suggesting that prices could rise to $130,000-$135,000 by the end of the third quarter.Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team based in Mumbai, holds a masters degree in Finance and a Chartered Market Technician member. Omkar previously worked at FXStreet, writing research on currency markets and as fundamental analyst at currency and commodities desk at Mumbai-based brokerage houses. Omkar holds small amounts of bitcoin, ether, BitTorrent, tron and dot.
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