Bitcoin and Ethereum Traders Prepare for Summer Volatility with Risk Reversal Strategies

Traders Eye Market Moves as BTC and ETH Prices Stagnate

As we enter the summer months, traders in Bitcoin (BTC) and Ethereum (ETH) are gearing up for potential market fluctuations. Currently, Bitcoin is priced at $101,462.68 while Ethereum sits at $2,274.33. Amid this price stability, market participants are employing risk reversal strategies to safeguard their profits.

Indicators Show Increased Demand for Protective Options

Recent data from Deribit and Amberdata reveals a notable trend: negative 25-delta risk reversals for both cryptocurrencies through the summer season. This trend suggests a heightened interest in put options, indicating that traders are proactively seeking to hedge against possible downturns. QCP Capital, based in Singapore, has also observed this trend, marking an uptick in protective measures for contracts set to expire between June and September.

Understanding Risk Reversal Strategies

A risk reversal strategy typically involves the concurrent purchase of puts while selling calls, or the opposite, to convey a specific market outlook. This approach is often utilized by traders to mitigate exposure in spot or futures markets, particularly during periods of unpredictability.

Downside Strategies Gaining Traction Among Traders

In the previous week, Paradigm’s over-the-counter data highlighted that Bitcoin’s most significant trades included a bearish risk reversal and a put spread. Similarly, Ethereum traders have shown a preference for negative positioning, evidenced by a recent purchase of a $2,450 put and the implementation of a short volatility strangle.

Bitcoin’s Recent Performance and Market Sentiment

Bitcoin has been trading above the $100,000 mark for over a month; however, recent profit-taking and selling by miners have diminished institutional interest fueled by spot ETFs. According to Coinbase Institutional, Bitcoin’s price movement has stabilized within a narrow range, prompting an increase in short-term protective strategies, particularly through put options. The 25-delta put-call skew for 30-day contracts has also increased, reflecting elevated caution among traders.

Analysis of Technical Indicators

Moreover, Bitcoin has recently closed beneath its 50-day simple moving average for the first time since April, raising the possibility of further selling pressure and a potential dip below the $100,000 threshold.

Mixed Sentiment in the Market

Despite the cautious outlook, not all sentiment leans pessimistic. Analyst Cas Abbé has pointed out strong on-balance volume metrics, indicating that there might still be potential for an upward movement toward the $130,000 to $135,000 range by the close of Q3. While traders remain wary, some analysts remain optimistic about a possible bullish breakout on the horizon.

Disclaimer: This article is provided for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research before making any investment decisions.