Expert Review of Cryptocurrency Derivatives Market Indicates Growing Bearish Sentiment
A recent study focusing on the cryptocurrency derivatives market has unveiled an increasing bearish sentiment among traders, particularly concerning significant digital assets like Bitcoin (BTC) and Ethereum (ETH). According to the latest findings from a collaboration between Bybit and Block Scholes, the implied volatility levels associated with Bitcoin and Ethereum options have spiked across multiple expiration periods, signaling a surge in uncertainty for the foreseeable future.
Nathan Thompson, the lead technical writer at Bybit, elaborated on the significance of the implied skew between out-of-the-money puts and calls in offering valuable insights into market sentiment concerning BTC and ETH options. Presently, the higher implied volatility linked to puts is indicative of a prevailing bearish view, a perspective shared by the options market for both cryptocurrencies.
The report underscores a distinct bias towards out-of-the-money put options for Bitcoin and Ethereum in the short term, reflecting an intensifying bearish sentiment as current prices face challenges in recovering. Traders are increasingly leaning towards put options instead of calls, aligning themselves for potential downward movements amid a decrease in open interest regarding perpetual swaps subsequent to recent sell-offs.
In a noteworthy development, Solana (SOL) has encountered negative funding rates for perpetual swaps in the previous week, hinting at a probable formation of a market bottom. Nevertheless, Thompson warns against making sweeping generalizations regarding the broader Layer 1 and Layer 2 ecosystem, emphasizing the enduring correlation existing among various crypto assets.
Post the recent options expiration date on August 30, there has been a notable decline in open interest for call options, along with continuous price declines and the absence of a substantial price recovery. These patterns have contributed to heightening doubts regarding an imminent market surge.
Thompson advises caution for less-experienced traders, recommending a wait-and-see approach for better market clarity. For those feeling more assured, he suggests considering calls expiring towards the end of September as a strategic maneuver to take advantage of the decreasing uncertainty anticipated by then.
In summary, the data from derivatives signals a predominant bearish sentiment prevailing in the cryptocurrency sphere, particularly towards Bitcoin and Ethereum. Traders are encouraged to proceed cautiously and maintain a close watch on market advancements to make well-informed decisions amid the ongoing volatility.
