Bitcoin and Ether: Are Summer Storms Brewing?

Bitcoin and Ether: Are Summer Storms Brewing?

While many analysts predict a bullish summer for Bitcoin (BTC) and Ether (ETH), savvy traders are taking precautions, signaling potential volatility ahead.

Options Market Hints at Downside Protection

Analysis of 25-delta risk reversals, a strategy involving put and call options, reveals a preference for downside protection. This suggests that long holders are actively hedging their positions in the spot and futures markets.

• Bitcoin: Risk reversals for June, July, and August indicate a stronger demand for put options (downside protection) compared to call options (bullish bets).
• Ether: Puts are pricier than calls for expiries up to the end of July, mirroring the trend in Bitcoin.

QCP Capital notes that this preference for downside protection suggests that long holders are preparing for potential drawdowns.

Key Indicators of Caution

The over-the-counter (OTC) liquidity platform Paradigm also reflects this nervousness. Recent top BTC trades included a put spread and a bearish risk reversal. In ETH, a long position in a $2,450 put was seen alongside a short strangle trade (betting against volatility).

Sideways Trading and Retail Hesitation

Bitcoin has been trading sideways, struggling to break above $70,000 for an extended period. Analysts suggest this may indicate that the current price is too high for many retail investors. Coinbase Institutional's report highlights a rise in open interest in BTC options, with a skew towards put options, suggesting short-term protection.

Technical Analysis: Breaking Support

Recently, Bitcoin closed below its 50-day simple moving average (SMA), breaking a key support level for the first time since mid-April. This could lead to further selling pressure and a potential drop below $70,000.

A Contrarian View: Bullish Momentum Remains

Despite the cautious sentiment, some observers remain optimistic. Cas Abbé points to Bitcoin's on-balance volume, which indicates strong buying pressure. This suggests that prices could rise to $130,000-$135,000 by the end of the third quarter.

Key Takeaways:

• Options data shows increased demand for downside protection in BTC and ETH.
• Sideways trading and potential support breakdown for BTC raise concerns.
• Some analysts maintain a bullish outlook based on on-balance volume.

Traders should closely monitor market movements and manage risk accordingly as the summer unfolds.