As the price of Bitcoin (BTC) plummets, notable positioning has emerged in the options market.
Jeff Park, chief investment officer at ProCap and Bitwise Advisor, said open interest (OI) on Bitcoin futures put options increased significantly at the end of December, with implied volatility returning to levels seen before the Spot Bitcoin ETF went public.
The $85,000 put position is the largest OI among Bitcoin options expiring on December 26th, at about $1 billion, according to data shared by Park. This number is higher than $620 million for $125,000 calls, $950 million for $140,000 calls, and $720 million for $200,000 calls with the same expiration date.
Park noted that while Bitcoin has fallen by more than $40,000 in the past six weeks due to “ETF outflows, Coinbase discounts, structural selling, and long position liquidations,” implied volatility has never exceeded 80% since the 2022 FTX crash. Park noted that volatility has been subdued for a long time after ETF inflows peaked in March 2024, and the uptrend has re-emerged in recent days. 60 days.
According to Park, the most significant recent change is the rise in implied volatility as the price of Bitcoin falls. This correlation, unusual in the post-ETF era, has been interpreted as a sign that the market may return to the previous Bitcoin volatility regime. Additionally, the 30-day put skew has fallen to its lowest level this year, indicating increased demand for defensive positions.
Park notes that year-end option positions are dominated by call options with gross par value, and large institutional investors remain interested in upside options. However, whether volatility continues to rise, whether ETF flows accelerate again, and how IV reacts if spot prices fall further will determine the direction of the market.
“It’s still too early to call for a definitive regime change,” Park said, adding that a downtrend with continued rising volatility could pave the way for a strong rebound in prices, but once volatility fades, the market could enter a more pronounced bearish trend.
*This is not investment advice.
