Insights

The calm before the storm? Bearish sentiment builds as premium for Bitcoin puts increase

Definition

Skew is the relative richness of put vs call options, expressed in Implied Volatility (IV). For options with a specific expiry, 25 Delta Skew refers to puts with a delta of -25% and calls with a delta of 25% to demonstrate this difference in the market’s perception of implied volatility.

25 Delta Skew is calculated as the difference between a 25-delta put’s implied volatility and a 25-delta call’s implied volatility, normalized by the ATM Implied Volatility. This metric focuses on options contracts expiring in 1 week.

Quick Take

  • Bitcoin Options 25 Delta Skew implies puts are becoming more favorable in this market, which indicates bearish sentiment is building in the crypto ecosystem.
  • January saw a bullish regime for Bitcoin, as calls were the favorable option.
  • February, however, saw switching between calls and puts, which was reflected in a fairly flat price structure for February.
  • However, March has seen Bitcoin down 3%, as the premium for puts continues to increase.
  • While volatility is near all-time lows, something could be brewing in the short-medium term.
Options 25 Delta Skew: (Source: Glassnode)
Options 25 Delta Skew: (Source: Glassnode)
Options ATM Implied Volatility: (Source: Glassnode)
Options ATM Implied Volatility: (Source: Glassnode)

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