Bitcoins Options Market Shows First Bias for Weakness in 6 Months Amid U.S. Debt Ceiling Drama

Bitcoins Options Market Shows First Bias for Weakness in 6 Months Amid U.S. Debt Ceiling Drama


Bitcoin’s options market is leaning towards weakness due to increased demand for downside protection in response to the U.S. debt ceiling drama, as traders in crypto and traditional markets hedge against the risks.

The renewed bias for Bitcoin (BTC) puts is consistent with the increased demand for downside protection seen in the options market tied to S&P 500.

Bitcoin’s (BTC) options market is showing bias for weakness over 6 months for the 1st time since early March as the United States debt ceiling drama continues.

The six- 30 days call-put skew, which measures the difference betwixt what investors are willing to pay for positive  tendency calls and bearish puts expiring in 180 days, has declined to -1, the lowest since March 13, reports by data from leading cryptocurrency options exchange Deribit, tracked by Amberdata.

Puts refer to some kind of option that increases in value as prices of the underlying investment fall. This gives their holder the right, but not the obligation, to sell an investment at a predetermined date at a specific price, effectively allowing them to bet against whichever investment that put option tracks.

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The one-week, one- and three- 30 days skews likewise show bias for puts. The development is consistent with the past few flows in the S&P 500 market that show traders paying up for put volatility.

Perhaps traders in cryptocurrency and traditional markets are starting to hedge against the United States debt ceiling dangers, seeing as Congress is struggling to raise the $31.4 trillion borrowing limit with less than a week until the Government runs out of money to meet obligations.

The escalating uncertainty over debt ceiling negotiations has likewise hit the bond market, where the one- 30 days yield has been  growing to a record high over 6%, data from charting platform TradingView shows. Rating agency Fitch has put United States on credit watch for a possible downgrade amid the debt ceiling impasse.

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The 10-year yield has jumped by over 30 basis points to 3.76 percent these 30 days, reaching the highest in over two months. The United States dollar has picked up a haven bid, pushing the United States dollar index over 104.00, a 10 percent monthly appreciation. Bitcoin (BTC) has decreased 10 percent to $26,260 this month.

The minutes of Federal Reserve’s early May meeting released Wednesday have firmed up expectations for another interest price hike next 30 days, reports by ING.

“Macro still dominates,” Markus Thielen, head of research and strategy at cryptocurrency services provider Matrixport, stated in a note to clients on Thursday.

Per Thielen, cryptocurrency investors should closely track the 10-year Treasury yield.

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“On May 15, 2023, the 10-year treasury yields climbed back over 3.5 percent and ever since, Bitcoin (BTC) prices have declined by 1,000 points. Investors should now patiently wait until the yields are losing their upside momentum before they buy cryptocurrency again,” Thielen said.

(12:25 UTC): Adds a line in the Sixth para about rating agency Fitch’s decision to put United States on watch for possible downgrade.

Shaurya Malwa.



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