Bitcoin’s slide has traders hedging against a drop to US$70,000
Bitcoin has tumbled roughly 20 per cent from a record high since Donald Trump’s January inauguration
WITH the so-called Trump bump fading across markets, Bitcoin options are showing that investors and traders are hedging against a decline in the cryptocurrency to levels last seen just after election day.
The open interest, or the number of outstanding contracts, for put options with a strike price of US$70,000 is the second highest among all contracts expiring on Feb 28, according to data from Deribit, the largest crypto options exchange. A total of US$4.9 billion in open interest is set to expire on Friday (Feb 28).
Bitcoin has tumbled roughly 20 per cent from a record high since Donald Trump’s January inauguration, as his combative stance against allies and geopolitical rivals alike shakes investor confidence, and concerns about elevated inflation linger. The crypto sector was also shook by a record hack of the Bybit exchange last week.
“Tariff policies are further dampening the outlook, and stubbornly high short-term inflation expectations add to the overall caution,” said Chris Newhouse, director of research at Cumberland Labs. “The Bybit exchange hack has exerted additional downward pressure on price and negatively impacted sentiment.”
Liquidations of long and short crypto bets accelerated on Wednesday, with about US$425 million of positions wiped out over four hours alone as at around 3.30 pm in New York, according to data compiled by Coinglass. More than US$2 billion of bullish bets were liquidated over the past three days. Bitcoin perpetual futures, one of the most common ways for offshore investors to add leverage, saw a sharp drop in long positions during the period.
Bitcoin fell for a fourth consecutive day, dropping around 5.6 per cent to US$83,744,bringing its decline of the period to around 13 per cent. That’s the biggest four-day slump since August. Other tokens such as Ether and Solana continued to be hit harder, with each down between 7 per cent and 10 per cent, respectively.
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The most recent price decline was also likely due in part to waning demand for Bitcoin exchange-traded funds (ETFs). As a group, the funds have seen about US$2.1 billion in outflows over the past six days.
“This is a mix of spot selling and basis unwind,” said Bohan Jiang, head of over-the-counter options trading at Abra. “In my view, nearly all of this is from ETF spot outflows from directional traders.”
Investors yanked more than US$1 billion from spot Bitcoin ETFs on Tuesday, the biggest outflow since the cohort debut in January last year. The outflows were led by Fidelity Wise Origin Bitcoin Fund (FBTC), followed by BlackRock’s iShares Bitcoin Trust ETF (IBIT). The group of ETFs that hold Ether directly also saw outflows to a milder degree to the tune of US$130 million.
“Ethereum, in particular, has felt the brunt of the Bybit incident, amplifying volatility,” Newhouse said. “Solana itself is giving up the gains seen over the past few months catalysed by faltering memecoin hype.”
The lack of a decisive signal for another bull run has prompted investors to sit on the sideline and rotate out of cryptocurrencies amid a risk-off environment.
“The crypto market is still in search of a new catalyst to reverse bearish sentiment,” said Ravi Doshi, co-head of markets at crypto prime broker FalconX. BLOOMBERG
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