After experiencing a strong surge last month, the cryptocurrency market seems to be brewing a new storm. The prices of Bitcoin and Ethereum have recently remained sluggish, and more concerningly, the options market shows a clear bearish tendency. The cryptocurrency options platform Derive.xyz points out that the Bitcoin and Ethereum options expiring on August 29 are significantly leaning towards put options, indicating that traders are hedging against the risk of a price drop by the end of the month. Is this a signal of a healthy market correction, or are the whales quietly setting up a "short feast" against the crypto market?
- "Death Cross" in the Options Market: Bearish Sentiment Prevails
Dr. Sean Dawson, head of research at Derive, stated in a market update shared with The Block on Wednesday that there is a clear bearish tendency in the August options market for Bitcoin and Ethereum.
Ethereum: The put options for Ethereum expiring on August 29 are currently more than 10% higher than call options, with the highest strike prices being $3,200, $3,000, and $2,200. Dawson believes this trend aligns with expectations of "from mild correction to deep correction." The price of Ethereum was around $3,624 on August 6, and it has dropped more than 4% in the past week.
Bitcoin: The bearish tendency for Bitcoin is even more pronounced. On August 29, the open interest for put options is nearly five times that of call options, with about half concentrated at the $95,000 strike price, and another quarter around $80,000 and $100,000. Analysts point out that this distribution indicates traders are "betting heavily that the price will fall significantly below $100,000." Bitcoin has dropped more than 3% in the past seven days, with today's trading price around $114,075.
Decreasing Skew: The skew, an indicator measuring the relative demand for put options versus call options, has decreased. Derive notes that over the past month, the 30-day skew for BTC has dropped from +2% to around -2%, while the 30-day skew for ETH has also fallen from +6% to around -2%. This indicates stronger demand for downside protection, with put option prices higher than call option prices.
Widening Volatility Gap: The monthly implied volatility for BTC is close to 35%, while for ETH it is near 65%. The volatility gap has widened from about 24 percentage points in early June to nearly 30 percentage points, suggesting that despite the lower ratio of put options to call options for ETH, its performance in August will be more turbulent.
- On-Chain Data and Market Sentiment: Record Activity, but Beware of Profit-Taking
Despite the bearish tendency in the options market, Ethereum's on-chain activity data shows strong engagement.
Ethereum On-Chain Activity Hits New Highs: In July, the Ethereum network's transaction volume reached 46.67 million, setting a monthly record and increasing by 3.6% compared to the historical peak in May 2021. The 7-day moving average (7DMA) of Ethereum network transactions is also nearing historical highs, reaching 1.64 million transactions. The number of active addresses on the Ethereum network also reached a high of 17.55 million in July, the highest level since May 2021.
Bitcoin On-Chain Transaction Volume Soars: In July, Bitcoin's monthly on-chain transaction volume exceeded $238 billion, a 70% increase month-over-month. This is also the highest monthly transaction volume since December 2021, setting a new high in nearly four years.
Bitcoin Cost Concentration Zone: CryptoQuant analyst CryptoMe indicates that on-chain data shows a significant cost concentration zone for Bitcoin around $105,000, including UTxO walls, average costs for 1-3 month holders, and realized prices for short-term holders all concentrated at this level. He notes that this is not a bear market signal, as Bitcoin is expected to reach higher price levels in the medium to long term, but if the price temporarily falls to this level, leveraged futures traders may face risks. He advises investors to appropriately reduce position risks and control volatility exposure.
OG Whales Taking Profits: Glassnode released a chart analysis showing that Bitcoin holders made over $1 billion in profits in the past 24 hours, with $362 million (about 35.8%) coming from OG whales who have held for 7 to 10 years. This rare phenomenon may reflect internal transfers or genuine exits. Additionally, $93 million in profits came from holders who have held for 1 to 2 years, also realizing significant gains.
Conclusion:
The August options market for Bitcoin and Ethereum shows a clear bearish tendency, with whales heavily betting on a significant price drop. This stands in stark contrast to the record high on-chain activity for Ethereum and the soaring on-chain transaction volume for Bitcoin. This complex interplay of bullish and bearish sentiments and market emotions suggests that the crypto market may face a major upheaval in August. Investors must remain highly vigilant, closely monitor options market dynamics, on-chain data, and macroeconomic trends, and prudently assess risks to cope with potential market volatility.
Related: A weaker dollar boosts Bitcoin (BTC) price expectations, but macro risks may delay the $120,000 target.
Original: “Death Cross Emerges in Bitcoin Options Market as Whales Bet on BTC Dropping Below $100K”
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