Bitcoin Option Traders Hedge Against Downside Risk as Price Dips to Near $32K

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Amid another drop in prices on Thursday, Bitcoin options traders appear less optimistic about the immediate outlook for the cryptocurrency.

The week-long put-call offset, which measures the spread between prices for short-term puts and calls, has risen to a five-week high of 14%. According to the data source Skew, the offset had bottomed near an extremely bullish -33% a week ago.

One-, three-, and six-month offsets have also risen from recent lows, but are still in bullish territory. The shift is the result of increased demand for downside hedges or puts as well as a significant sale of bullish calls.

“Over 380 contracts expiring on January 29th were bought today for $ 30,000,” the Swiss-based data analysis platform Levitas told CoinDesk. According to Skew, call selling accounts for almost 50% of the total trading volume on the major exchanges.

Bearish bets or puts have been drawing bids since Tuesday. According to Deribit Insights, the demand for put options was high at $ 32,000 and $ 36,000 on Wednesday. Someone bought more than 600 contracts on Tuesday with expiration options for January 29th. The data shows that some investors were preparing for a fall in prices.

Bitcoin is exposed to gravity at press time, trading up 6.4% at $ 32,940. The price had recently fallen to $ 32,200, its lowest level since January 11th.

The losses could be due to regulatory concerns sparked by recent comments by US Treasury Secretary Janet Yellen that the use of cryptocurrencies must be restricted in illegal funding.

Additional bearish pressure could come from prominent investors, who say prices are unlikely to return to recent all-time highs near $ 42,000 for some time.

“We’ve probably hit the top for Bitcoin for the next year or so. We’ll likely see a full retracement to the $ 20,000 level, ”Guggenheim Global’s CIO Scott Minerd told CNBC on Wednesday.

The cryptocurrency could continue to be subject to chart-driven sales in the short term.

Bitcoin has emerged from a narrower price range with a move towards $ 32,000. Supporting the breakdown of the range is a decline below 14 for the 14-Day Relative Strength Index (RSI). As such, $ 30,000 psychological assistance is available.

If the sell-off gains momentum, put options are likely to experience increased buying pressure.