- Bitcoin volatility has dropped, but traders are still paying significant premiums for downside protection, a report from VanEck shows.
- The volume of bets on Bitcoin falling compared to bets on it rising is at levels not seen since 2021, indicating strong defensive positioning.
- Historically, this level of market fear has tended to signal periods closer to market bottoms rather than tops.
- Activity by Bitcoin’s long-term holders appears to be slowing, suggesting selling pressure may be easing.
A new report from investment firm VanEck reveals that Bitcoin traders are unusually defensive, paying up for protection against price drops even as volatility subsides. Data shows Bitcoin’s realized volatility has fallen from 80 to 50 over the past month, while its price stabilized near $70,000. However, a total of $685 million was paid over the past 30 days to purchase “puts” – options that profit from a decline.
“Traders continue to pay significant premiums for downside protection,” the report reads. Consequently, the ratio comparing bets on Bitcoin going down to bets on it going up averaged 0.77, hitting marks unseen since 2021. Meanwhile, this indicates unusually strong demand for hedging relative to bullish positioning.
Nevertheless, this level of market fear might be a positive signal for bulls. “When options markets have been this fearful in the past, Bitcoin has tended to recover,” the report noted. Historically, such defensiveness has marked periods closer to market bottoms than tops.
Other data suggests selling pressure from long-term holders may be slowing. Activity among holders of at least one year declined month-over-month. Bitcoin’s price is currently $69,891, down slightly in the last 24 hours but up over 5% in the past month, still nearly 45% off its all-time high.
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