Crypto traders have quickly resumed placing optimistic bets on Bitcoin in the options market despite the recent market crash, which resulted in billions of dollars in liquidations, Bloomberg News reported, citing market experts.
Bitcoin fell to a low of $48,818 on Aug. 5, its lowest since February, amid mounting fears of a recession and potential war in the Middle East. However, despite the steep decline, institutional investors began buying in as the price fell.
According to the report, traders have been buying call options on both offshore exchanges and US over-the-counter desks, granting the right to purchase Bitcoin at $90,000 or higher later this year.
On Aug. 4, approximately $1.1 billion in crypto positions were liquidated, marking one of the largest selloffs this year, according to Coinglass. Bitcoin fell by as much as 17%, while Ethereum saw losses exceeding 20% during Asian trading hours.
However, both cryptocurrencies started to recover by Aug. 6 as investors bought back into the market at cheaper prices, indicating a high amount of buy pressure below $50,000.
As of press time on Aug. 8, Bitcoin was trading at $59,350 after climbing another 8.31% over the last 24 hours, based on CryptoSlate data.
Institutional traders buy the dip
Yevgeniy Feldman, the co-founder of SwapGlobal, which provides prime brokerage and swaps to institutional investors, told the news outlet that around 50% of the open interest in crypto derivatives was liquidated during this downturn.
Feldman said:
“People got extremely liquidated on longs; it was horrific. But by Monday and Tuesday, US hedge funds and institutional participants using OTC desks began making bullish options bets again by purchasing call spreads on Solana and Bitcoin.”
He added that the increased demand for Bitcoin on Coinbase has driven the rebound. Feldman further explained that the bid-to-offer ratio, which measures the total amount of buy commitments for Bitcoin compared to those seeking to sell, shows a substantial imbalance.
This indicates a significant number of buyers waiting at $49,000 and below.
Lower in the short-term
Meanwhile, short-term hedging against a lower price has surged on offshore exchanges in recent days. The put-to-call ratio on Deribit remains elevated, with more puts being bought than calls in the past 24 hours.
According to Feldman, retail investors on these platforms tend to trade crypto with more hedging in options compared to US-based institutions that typically hold large Bitcoin positions and use OTC desks.
Furthermore, Ravi Doshi, head of markets at prime broker FalconX, told Bloomberg:
“While short-term skews heavily favor puts, post-election skews remain inclined toward calls even after the steep selloff. Traders continue to anticipate a bullish second half of the year for Bitcoin, as they have throughout most of the year.”
Doshi noted that currently, the September $90,000 calls, December $100,000 calls, and March $100,000 calls hold the largest open interest strikes in the listed market, with nearly $1 billion in notional value for these three options alone.
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