HODL your horses, Bitcoin options data says $18.5K is not a local top

Published on by Cointele | Published on

Oddly enough, not even the 30% crash that followed the $13,850 top reduced the futures contract premium.

The above chart shows the basis indicator quickly falling below 10% right after the $18,500 top formation.

To better assess the current market sentiment, investors should also evaluate options market spreads.

The 25% delta skew indicator will shift to negative when call options are more costly than equivalent put options.

Oddly enough, Bitcoin underwent an 80% bull run in the three weeks preceding the $13,850 top, but the options market seemed ill-prepared for this.

At the time, protection for the upside using call options were trading at the same premium as the bearish puts.

We can conclude that option traders were pricing in the same probability of a strong market swing in either direction.

Traders are unwilling to sell protection for the upside, thereby causing the skew indicator to reach an unprecedented -30%. As professional traders are demanding a sizable premium for bullish call options, one can only conclude that a sudden price dump is far away from their expectations.

Investors should not make decisions solely based on the interpretation of a single indicator that shows option traders are overly bullish right now.

There are substantial differences between July 2019 top and the current market according to futures and options markets.