Bitcoin Faces Deeper Losses as Traders Hedge and Hold Longs

Bitcoin options traders increased demand for downside protection in the week through Oct. 19, while perpetual-futures traders continued to hold bullish positions. The opposing positions emerged as Bitcoin struggled to recover from its October decline.

Glassnode’s 25-delta options skew rose from 5.2% to 8.6%. The measure compares the prices of put and call options, and the increase indicated that puts protecting against a decline became more expensive than comparable calls. The reading remained below the upper end of its historical range.

The spread between implied and realized volatility rose from minus 3.8% to positive 2.1%. This indicated that options traders began paying more for protection against future price swings after a period of relatively calm trading.

Bitcoin traded near $81,300 at the time of the report, more than 2% below its level a week earlier. The cryptocurrency has struggled to recover from its October decline, while $80,000 has repeatedly attracted buyers.

Bitcoin options open interest rose 3.1% to $38.6 billion from $37.4 billion. The increase indicated that outstanding options positions grew even as spot-market demand remained weak.

Glassnode’s spot cumulative volume delta, which measures the difference between aggressive buying and selling, fell from minus $67 million to minus $83.6 million. Trading volume edged up from $5.4 billion to $5.5 billion. The data showed higher selling pressure despite little change in overall participation.

Perpetual-futures traders continued to favor long positions. Aggregate funding payments from long traders rose 49.4% to $1.6 million from $1.1 million. Funding payments are exchanged between long and short traders to keep perpetual-futures prices aligned with Bitcoin’s spot price. The increase indicated that long traders paid more to maintain leveraged exposure.

Bitcoin futures open interest slipped 0.3% to $36.4 billion from $36.5 billion. The decline occurred while long traders continued to pay funding costs.

Selling pressure in the perpetual-futures market eased during the week. The market’s cumulative volume delta improved from minus $891.1 million to minus $562.7 million, a 36.9% recovery. The measure remained below its lower statistical band, indicating that aggressive sell orders still exceeded buy orders.

On-chain data showed a higher share of Bitcoin supply held by recent buyers. The ratio of short-term to long-term holder supply rose from 14.5% to 14.7%, moving above its historical upper band. Short-term holders controlled 20.3% of the supply.

Bitcoin’s supply held in profit fell from 70.1% to 68.2%. The realized profit-to-loss ratio declined from 0.8 to 0.4, indicating that realized losses exceeded realized gains during the period.

A break below $80,000 could increase pressure on leveraged traders to reduce their positions. The Federal Reserve’s policy meeting scheduled for Oct. 27-28 is the next listed market event. Investors will assess whether persistent U.S. inflation could affect the central bank’s interest-rate policy.