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Bearish Bets Being Placed on Bitcoin as Halving Nears

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With the much-anticipated bitcoin (BTC) halving now less than a month away, more traders are placing bearish bets on the price of the number one cryptocurrency, signaling some degree of doubt as to how enthusiastically the event will really be received by the market.

Source: Adobe/Rawpixel.com

The bets, known in trader circles as put options, have risen steadily relative to the opposite bet – call options – since March 23, data from the crypto derivatives analytics provider Skew shows.

Options are financial derivatives that provide the holder with the right but not the obligation to buy or sell an asset at a specific price on a predetermined date. As such, options enable speculators to bet on a price rise or decline of an underlying asset using leverage. A call option gives the investors the right to buy an asset and a put option gives the right to sell it. (Learn more:How to Bet on Bitcoin Volatility Using Bitcoin Options)

Also, the data shows that trading volumes in the options market have been on the rise, a sign that is usually considered to add support to existing price trends in the market.

The ratio of bitcoin put options to call options in terms of open interest (black line) and trading volume (yellow line) shows a rising trend. Source: Skew.

Looking at total open interest for bitcoin options, however, it seems that the higher interest in put options is not reflected in a generally higher interest in options trading. On the contrary, the trend in total open interest is pointing lower after seeing a peak on March 26.

Also, as we have gotten used to seeing in the bitcoin options market, the overwhelming majority of the interest stems from retail-focused exchanges, with the more institutionally oriented marketplaces CME and Bakkt only accounting for a tiny share of total open interest.

The total open interest in bitcoin options shows a declining trend, starting from the peak on March 26. Source: Skew.

With a current bitcoin price of about USD 6,840, it’s also interesting to note that the options market does not appear overly optimistic about bitcoin’s prospects following the halving. Again according to Skew’s data, bets placed in the options market currently show a probability of 34% that bitcoin will reach a price of USD 7,000 or higher by December this year. In fact, the bets suggest that there is a 50% chance that bitcoin will drop to USD 5,000 or below by year-end.

Source: Skew.

Although the general sentiment in crypto community has been largely bullish towards the upcoming halving in the bitcoin mining rewards, the data shows that traders cannot take anything for granted in the bitcoin market.

Learn more:
‘Bitcoin Halving’ Is Now More Popular Than ‘Bitcoin’ on Google
Bitcoin Approaches Halving With Bitcoiners Still Divided Over Its Effects
Number of Bitcoin Whales Hits 2 Year High as Accumulation Accelerates
Number of Addresses with BTC 1 Rising, while Bitcoin is Leaving Exchanges