Bitcoin has not been able to regain the $61,000 level since Thursday. Although the decline in oil prices following the 60-day ceasefire agreement between the USA and Iran supported the risk appetite, this optimism did not create a permanent recovery in the cryptocurrency market. The sharp increase in demand for protection, especially against downward price movements, led investors to re-discuss the $55,000 level.
Remarkable demand for hedging in the options market
According to Deribit data, the premium paid for Bitcoin put options on Friday reached $115 million. In the same period, the amount paid for call options remained at 16 million dollars. Thus, the imbalance between the selling and buying sides reached the highest level in the last 12 months. Although this chart indicates that bullish expectations have weakened, it does not alone show that sellers have full confidence in the market.
On Monday, the 30-day delta skew rate for Bitcoin was measured at 19 percent. This level reveals that market makers are reluctant to bear downside risk. Although a similar trend has been seen over the last four weeks, data shows that demand for downside protection remains strong as the persistence problem above $60,000 persists.
Mini dictionary: Delta skew is a measure that shows the difference between the risk premiums assigned to downward and upward contracts in the options market. A higher ratio indicates that investors are generally buying more protection against downside risk.
The fact that the premium paid for put options on the Deribit side increased by seven times that of call options revealed that the search for protection against downside risks in Bitcoin has become unusually strong.
Strategy move reduced short-term pressure
Some of the weakness in Bitcoin is attributed to concerns about Strategy’s dividend payments and debt due in 2027. Strategy, previously known as MicroStrategy, is known as a company that stands out with its Bitcoin-focused corporate balance sheet. The company announced Monday that it had raised $1.2 billion in additional cash from recent stock sales and had set aside $1.25 billion in Bitcoin for sale as needed.
While these steps alleviated short-term debt concerns, they also raised new questions about the balance of Bitcoin supply and demand. Even if there are no outright sales in the next few months, a portion of the market thinks the pressure to issue new MSTR stock is easing due to the company’s current dividend coverage.
Capital flows turn to technology stocks
As inflation pressure eased in the US markets and oil prices fell to their lowest levels in the last four months, interest in risky assets gained strength on the stocks side. Goldman Sachs predicted annual profit growth for S&P 500 companies at 22 percent. This forecast somewhat calmed concerns about high valuations.
According to The Kobeissi Letter analysis, individual investors are moving out of gold and Bitcoin and into semiconductor stocks. Bloomberg data showed a total of over $20 billion in inflows into semiconductor-focused exchange-traded funds. This flow brought about an 81 percent rise in the iShares Semiconductor ETF and a 60 percent rise in the VanEck Semiconductor ETF.
The seven consecutive weeks of net outflows in spot Bitcoin ETFs traded in the USA also weakened bullish expectations. This chart was not supportive for investors who expected a strong bounce from the $58,050 low seen on June 25. While capital flows towards technology stocks continue, it is considered that outflows on the spot ETF side may continue to suppress market sentiment.
Therefore, a retest of the $55,000 level is not considered unlikely. However, the increased demand for downside protection in the options market does not by itself mean that sellers have become stronger.
