Bitcoin options data point to bearish sentiment among investors

Bitcoin options data point to bearish sentiment among investors

The put/call ratio for bitcoin options hit a new high for the year on Thursday, data shows.

Bitcoin (BTC) options activity points to increasing bearish sentiment among investors as the asset hovers between the $29,000 and $30,000 price levels.

Bitcoin fell to nearly $24,000 last week amid systemic risks within the crypto ecosystem and inflation fears in the broader market, and the value has fallen for seven straight weeks since Friday.

The asset's price movements have been highly correlated with U.S. markets in recent months, with poor earnings reports and aggressive comments from the Federal Reserve (Fed) showing an impact on bitcoin prices.

Investors are placing their bets accordingly.

The put/call ratio for open interest in bitcoin hit a 12-month high of 0.72 yesterday, research firm Delphi said in a note Friday, adding that the data "indicate bearish sentiment among investors. A similar ratio was reached last May.

"The put/call ratio measures the amount of buying of puts relative to calls," Delphi analysts explained in the note. "A high put/call ratio suggests that investors are speculating on whether bitcoin will continue to sell off, or it could mean that investors are hedging their portfolios against a downward move."

"Last April, the put/call ratio was 0.96 before the bitcoin price fell more than 50% in May 2021," the firm added.

Put options are a contract that gives the option buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price. Call options, on the other hand, give the buyer the right to purchase the asset at a predetermined price.

At the time of writing, there are over 63,000 bitcoin worth of options open, which expire on May 27.

Thursday's rise in the put/call ratio surpassed the previous high of 0.69 in February 2022 and is 38% higher than the one-year low of 0.44 in December, data from analytics tool skew show.

Crypto exchange Deribit leads the options volume with over $7 billion in open interest as of May 17. These levels represent a rebound from late last month, when open interest plunged $2 billion in two days from April 28-30.