The way Bitcoin options are priced suggests traders are reducing their bullish bias as the January 10 deadline for approval of spot ETFs by the U.S. Securities and Exchange Commission (SEC) approaches.
Options bias tracked by Amber Data shows that calls expiring in one week, one month, two months and three months were trading at about a 2% premium to puts, whereas in early November It was 8%. The steady pullback reflects more cautious bullish sentiment towards Bitcoin.
A call gives the buyer the right, but not the obligation, to buy the underlying asset at a specified price at a later date. Call buyers are implicitly bullish on the market, while put buyers are bearish. Option skew measures the relative demand for calls and puts.
Perhaps traders are in wait-and-see mode ahead of expected ETF decisions. The cryptocurrency, which has soared 61% in three months on expectations for the ETF, is likely to fall once the much-anticipated product actually arrives, according to some analysts. .
The weakening of the call bias in long-duration skews is also consistent with out-of-consensus analysis that billions of dollars of inflows into ETFs are likely to occur over time rather than immediately.
One-week options ATM implied volatility, which measures the market's expectation of price movements over the next seven days, has nearly doubled at an annualized rate since Dec. 29, outperforming longer-duration metrics.
It warns traders to remain cautious just before and after the January 10 deadline.
As duration increases, the implied volatility gauge shows smaller increases. Traders expect the ETF's announcement to have a temporary impact on the level of price volatility. Additionally, some analysts expect ETFs to weigh on price movements over the long term.
