In the options market, cryptocurrency traders are quickly re-entering bullish bets following one of the worst liquidations of bullish positions of the year over the weekend.
Market participants report that traders are purchasing calls that provide them the opportunity to purchase Bitcoin at $90,000 or higher later this year. These traders come from both offshore exchanges and US over-the-counter desks.
On August 4, one of the biggest selloffs of the year, around $1.1 billion in cryptocurrency bets was liquidated. Ether dropped more than a fifth of its value at one point during the meltdown that started during Asian trading hours, with Bitcoin falling as much as 17%. By Tuesday, both were trading higher. Yevgeniy Feldman of SwapGlobal, which offers institutional investors prime brokerage and swaps, estimates that during the collapse, about half of the open interest in cryptocurrency derivatives was liquidated.
It was horrifying how people were severely liquidated on longs, according to Feldman. However, on Monday and Tuesday, institutional and hedge-fund traders in the US who use OTC desks to trade options resumed placing optimistic bets on the market by purchasing call spreads on Solana and Bitcoin.
The enormous demand for Bitcoin on Coinbase Global Inc. has been one of the main factors propelling the recovery, according to Feldman. According to exchange order book data compiled by SwapGlobal, the bid-to-offer ratio illustrates this, with pledges to acquire Bitcoin overall much exceeding those looking to sell.
Feldman stated that these disparities show that there are a great deal of customers waiting at prices of $49,000 and below. Monday saw the lowest price of bitcoin since February, falling as low as $49,212.
On offshore markets, short-term hedging against a decline in price has surged in the past several days. On Deribit, the put-to-call ratio is still high because more puts than calls were purchased over the previous day. According to Feldman, put buying is more common on exchanges because, unlike US-based institutions that would have substantial Bitcoin holdings and use OTC desks, retail investors using these platforms typically trade cryptocurrency in and out of the asset class with more hedging in options.
Ravi Doshi, head of markets at premier broker FalconX, stated that although skews strongly favor puts in ahead of the curve, post (the US presidential) election skews stick to the call even after the sharp sell off. Traders continue to anticipate a bullish second half of the year for Bitcoin, as they have for the majority of the year.
According to Doshi, the September $90,000 calls, December $100,000 calls, and March $100,000 calls have the greatest open interest strikes in the listed market as of right now, with a combined notional value of around $1 billion. In New York on Tuesday, the price of bitcoin was up almost 4.5% to $56,850.
The likelihood that Donald Trump, who has turned into a pro-crypto enthusiast, would win a second term as US president is one of the factors contributing to the bullish prognosis on cryptocurrency near year’s end.
