Takeaways from the conference:
- A large delta and extreme put-call option imbalance of 19% reveal a heavy hedge against price drops.
- The cash stash of Strategy eases concerns about short-term borrowing but doesn’t prevent a wider capital allocation to tech stocks.
Bitcoin is still below the $61,000 level despite the optimism generated by the lower crude oil price following the US-Iran 60-day ceasefire. The demand for Bitcoin downside protection has risen to an unusually high level, leading traders to wonder if $55,000 will be the next goal.
Deribit Bitcoin premium Put-to-Call ratio. Source: Laevitas
On Friday, the premiums paid for Bitcoin call options (buying) on Deribit came to $115,000,000. This was 7 times more than what $16,000,000 paid in premiums on put options (selling). This was the largest imbalance in more than a year, indicating a very low level of demand by bulls. Such data do not always indicate a conviction on the part of bears.
Bitcoin 30-day options delta skew (put-call) at Deribit. Source: Laevitas
Market makers were unwilling to take a downside risk on the Bitcoin price, as evidenced by Monday’s 19% Bitcoin delta skew. It is not surprising that this setup reflects fear. However, it has always been like this for the last 4 weeks. As Bitcoin’s price struggle to hold levels above $60,000, data shows a rise in demand for bearish hedges.
Bitcoin’s decline can partly be attributed to investor’s discomfort over MicroStrategy’s (MSTR US’s) inability to pay dividends, and its debt maturity date of 2027. The company responded on Monday with an announcement of additional debt maturing in 2027. $1.2 billion in cash Bitcoins worth $1.25 Billion were set aside for future sale from the recent sales of shares.
Although the measures adopted by Strategy are a short-term solution, they also raise concerns about Bitcoin’s demand and supply dynamics. Bears can be more relaxed knowing Strategy does not have any incentive to sell MSTR stock in the near future, given that the dividend coverage is currently 17 months.
Related: Grayscale’s Pandl says Strategy should sell $3B Bitcoin to restore confidence
Switching from Bitcoins and Gold to Semiconductors
The US stock market is now moving in the opposite direction of Bitcoin investors, as inflationary pressure has eased and crude oil prices have dropped to their lowest level in four months. Goldman Sachs also released a report that showed the US stock market is moving in a positive direction. report projected 22% annual earnings growth for S&P 500 companies, easing concerns about excessive valuations.
Source: X/KobeissiLetter
Retail investors appear to be rotating out of gold and Bitcoin into semiconductor stocks, according to ‘The Kobeissi Letter’ analysis. Bloomberg data shows that over $20 billion has been invested in semiconductor ETFs. This led to a rally of 81% in iShares Semiconductor ETF(SOXX US), and a 60% gain in VanEck Semiconductor ETF(SMH).
US-listed Bitcoin Spot Exchange-Traded Funds Weekly Net Flows, USD. Source: SoSoValue
Net outflows of funds from 7 consecutive weeks US-listed Bitcoin spot ETFs Bulls have been disappointed in their hopes for a big bounce off the June 25 low of $58,050. No matter if the selling can be attributed the rotation to tech stocks, the sentiment will not improve as long as Bitcoin spot ETFs see strong net outflows.
It is not a good idea to dismiss a retest at $55,000, however the demand for Bitcoin options that hedge against downside should not indicate heightened confidence by bears.
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Source: cointelegraph.com
