Bitcoin’s long-awaited break above $100,000 has ignited a flurry of activity in the crypto market, but not all of it is bullish.
Traders are taking positions to prepare for a potential pullback after the historic rally. Options data reveals a massive increase in demand for puts, contracts that allow the holder to sell Bitcoin at a fixed price within a set timeframe.
Amberdata shows that puts with strike prices at $95,000 and $100,000 have seen the largest open interest over the past 24 hours. Traders are also snapping up puts at even lower levels, with $75,000 and $70,000 strike prices gaining popularity, Bloomberg reported.
According to Luke Nolan, a research associate at CoinShares, these positions are primarily set to expire between late December and late February. He explained that this timeline aligns with the market’s expectations for potential surprises following Bitcoin’s sudden price surge.
Funding rates signal high leverage
Despite the hedging activity, bullish sentiment remains strong. Bitcoin’s funding rate, a critical metric for gauging leverage in perpetual futures contracts, is nearing record highs. This means that traders are aggressively leveraging long positions, betting on further price increases.
On the options side, short-dated calls with strike prices between $100,000 and $110,000 have seen a significant spike in activity. Overnight, over $2 million was spent on call spreads between $110,000 and $160,000, set to expire in late January, according to Wintermute OTC trader Jake Ostrovskis.
Elevated funding rates often precede corrections, as seen during Bitcoin’s rally in March, where funding rates hit an annualized high of 145% on Deribit.
Institutional traders are also playing a big role in the current market dynamics. CME futures, a preferred tool for institutional investors in America, are trading at insanely huge premiums. Offshore exchanges, alongside new options tied to BlackRock’s spot Bitcoin ETF, have seen increased activity as well.
At press time, Bitcoin has actually already corrected a little. It is now worth $98,772.
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