Options data shows heavy bearish betting, with traders pricing in more downside risk.
The cryptocurrency market extended its losses on Thursday with Bitcoin briefly breaking below $110,000, prompting altcoins to follow suit.
Bitcoin has since recovered to $110,418, down 1.3% on the day according to CoinGecko data. The majority of the top ten cryptocurrencies by market cap, excluding stablecoins, have remained in the red, with losses ranging from 0.9% to 5.3%.
Ethereum fell 1.8% to around $4,000, while XRP dropped 4% and is currently trading around $2.40. Solana, Cardano, and Dogecoin are down 4.9%, 3.5% and 3.9% respectively, according to CoinGecko data. The sole exception among the top 10 is Tron, up 1.2% on the day.
“Altcoins are under pressure as liquidity continues to rotate back into Bitcoin and stablecoins amid risk-off sentiment,” Wenny Cai, co-founder and COO of crypto derivatives platform SynFutures told Decrypt.
As a result, the crypto market capitalization has dropped 1% to $3.85 trillion, according to CoinGecko, resulting in total liquidations of roughly $524 million, per CoinGlass data.
“There seems to be an overhang from last weekend’s $19 billion liquidation bonanza,” Max Shannon, senior associate at Bitwise Europe, told Decrypt.
“I think caution is warranted, as the US-China trade war remains on uneven footing, suggesting that price action is likely to stay range-bound until this cloud passes,” Shannon added.
The current downturn reflects an extended market-wide de-risking trend that began as the U.S.-China trade tensions escalated last week, triggering a historic leverage wipeout.
A sharp rise in bearish positioning has occurred over the past 24 hours, options analytics platform GreeksLive, posted in a tweet on Thursday.
“More than $1.15 billion, or about 28% of total options volume, has flowed into shallow out-of-the-money puts expiring this week and this month,” the tweet stated. The concentrated activity in the $104,000 to $108,000 strike range signals that traders are actively hedging against further downside.
Options skew has turned significantly negative, the firm noted, suggesting that “options participants — particularly large liquidity providers — are pricing in substantial downside risk, with sentiment nearing that seen after the broader market drop on the 11th.”
“I expect alt price action to be highly dispersed with some continue to bleed in the near term amid fragile risk sentiment, whilst others higher-quality high-beta alts play catch up,” Shannon explained.
“It wouldn’t be surprising to see more choppy price action as leverage resets and capital consolidates around majors,” Cai noted, echoing the short-term uncertainty surrounding altcoins.
With fear dominating market sentiment and options traders betting on further declines, the path to recovery appears contingent on a de-escalation of trade war rhetoric and a return of stable institutional demand.
