Representative image of bitcoin.
Credit: Reuters Photo
New York: Investors in the world's largest cryptocurrency are anticipating a significant downward move after bitcoin failed to hit an all-time peak of $100,000, according to a crypto trading platform citing recent options activity.
Bitcoin hit a record high of $99,830 on Nov 22, but it has since fallen more than 8 per cent to a one-week low of 91,377.32 on Tuesday.
The best-known cryptocurrency has soared 120 per cent so far this year and about 34 per cent this month with the election of Donald Trump as U.S. president and a slew of pro-crypto lawmakers in Congress. Trump embraced digital assets during his campaign, promising to make the United States the "crypto capital of the planet," and accumulate a national stockpile of bitcoin.
Nick Forster, founder of onchain options decentralized protocol Derive with total trade volume of $7.1 billion, said in emailed comments on Tuesday that the so-called call-put skew index for the upcoming Dec. 27 bitcoin expiry showed a significant 30 per cent drop in the last 24 hours, as market participants shifted toward more protective strategies.
The call-put skew, which reflects market sentiment, refers to the difference in implied volatility between calls (options to buy) and puts (options to sell). This skew still shows a preponderance of calls over puts, although it has since declined.
"It suggests traders are hedging against potential downside risks," Forster said, likely in response to BTC falling sharply. "However, pullbacks like these are not uncommon in bull markets."
Investors are looking to Dec. 27, when $11.8 billion in bitcoin options expire that could trigger major moves in either direction.
According to Foster, there is a 68 per cent chance of bitcoin moving 16.03 per cent lower to $81,493 or 19.9 per cent higher to $115,579 by December 27. There is, however, a smaller probability of about 5 per cent of bitcoin making bigger moves -- a 29.49 per cent fall to $68,429 or a 41.83 per cent surge to $137,645 by the same date.
Derive data also showed higher odds of 45 per cent of bitcoin hitting $100,000, from last week's 34 per cent, with a new 4 per cent probability of surpassing $150,000.
Forster also noted stability in bitcoin's volatility in the last seven days, with the seven-day at the money implied volatility at 63 per cent and the 30-day level at 55 per cent.
"This close alignment suggests the market anticipates significant movements soon."
Bitcoin has come off its high perch for now, and one of reasons cited by market participants for the decline was good old profit-taking.
Anthony Pompliano, founder and chief executive officer at Professional Capital Management, in his letter to clients on Tuesday, cited _checkonchain.com analysis, which noted that long-term holders have distributed $60 billion worth of supply in the last 30-days.
Of long-term holders' supply moved since the bitcoin's bottom of $15,479 hit during the FTX collapse two years ago, 21 per cent of it has happened in November, which is the "heaviest profit-taking we have seen so far this cycle," according to a post of _checkonchain.com on X.