As summer approaches, experienced crypto traders are preparing for potential market turbulence by implementing protective options strategies. Data reveals a growing preference for downside protection in both Bitcoin (BTC) and Ether (ETH), even as some analysts predict new all-time highs later this year.
Risk Reversals Signal Caution
The 25-delta risk reversal metric—a key gauge of market sentiment—shows traders are prioritizing puts over calls, indicating concerns about a possible summer downturn.
- BTC’s risk reversals for June, July, and August remain negative, reflecting higher demand for put options (bearish bets).
- ETH’s put premiums are elevated through July expiries, suggesting traders are hedging against short-term downside risks.
Why Are Traders Hedging?
- Profit-taking by long-term holders and miner selling have kept BTC range-bound near $100K.
- Despite strong spot ETF inflows, BTC has struggled to break out, leading to sideways consolidation.
- ETH’s price action remains subdued, with traders protecting against further declines.
OTC Markets Reveal Bearish Positioning
Over-the-counter (OTC) trading platforms like Paradigm show:
- Top BTC trades include put spreads and bearish risk reversals.
- ETH traders are buying $2,450 puts while selling strangles (betting against volatility).
Technical Outlook: Breakdown or Breakout?
Short-Term Bearish Signals
- BTC recently closed below its 50-day moving average for the first time since mid-April.
- A sustained drop below $100K could trigger further selling pressure.
Long-Term Bullish Potential
- On-balance volume (OBV) suggests strong accumulation, hinting at a possible rally to $130K–$135K by Q3 2024.
- Analysts at Coinbase Institutional note that while retail interest is muted, institutional demand remains robust.
Key Takeaways for Traders
- Hedging is increasing as traders brace for summer volatility.
- BTC and ETH options markets favor downside protection in the near term.
- A break below $100K could accelerate selling, but long-term bullish trends remain intact.
- Q3 2024 could see BTC challenge new highs if buying pressure persists.
Final Thought
While short-term caution dominates, the broader crypto market still holds upside potential. Traders are balancing defensive strategies with expectations of a late-summer rally.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.