What Do Option Data in Bitcoin Indicate?

What do option data tell us in Bitcoin? ProCap's investment director Jeff Park evaluated.
While the price of Bitcoin #BitcoinPriceWatch BTC( experiences a sharp loss in value, a notable positioning has emerged in the options market.

ProCap's investment director and Bitwise advisor Jeff Park stated that at the end of December, the open position volume for Bitcoin futures sale options significantly increased and the implied volatility returned to the levels before the listing of spot Bitcoin ETFs.
According to the data shared by Park, among the Bitcoin options that will expire on December 26, the $85,000 sell position has the largest OI with approximately $1 billion. This figure surpasses the $620 million of $125,000 call options, the $950 million of $140,000 calls, and the $720 million of $200,000 calls for the same expiration.
Park reminded that Bitcoin has fallen more than $40,000 in the last six weeks due to "ETF exits, Coinbase discount, structural sales, and liquidated long positions," but the implied volatility has never exceeded 80% since the FTX collapse in 2022. Noting that volatility has been suppressed for a long time following the peak of ETF inflows in March 2024, Park stated that an upward trend has emerged again in the last 60 days.

According to Park, the most critical change in recent times is the increase in implied volatility while the Bitcoin price declines. This correlation, rarely seen in the post-ETF period, is interpreted as a sign that "the market may return to the old Bitcoin volatility regime." Additionally, the decrease of the 30-day put skew to its lowest level of the year indicates that demand for defensive positioning has increased.
Park states that in the option positions for the end of the year, the total nominal value of call options outweighs, and that large institutional investors are still showing interest in upward options. However, whether volatility will continue to rise, whether ETF flows will accelerate again, and how IV will react if the spot price falls further will determine the direction of the market.

Park, who said "It's still early to talk about a definite regime change," stated that a decline process in which volatility continues to rise could create the groundwork for a strong price bounce; however, if volatility fades, the market could enter a more pronounced bear trend.
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