BTC Put/Call Ratio at 0.69: Traders Fear BTC Could Fall Further

Neither the author, Tim Fries, nor this website, The Tokenist, provides financial advice. Please review our website policy before making any financial decisions.

While Bitcoin’s price is still moving sideways, the same cannot be said for its open interest. At the end of May, Bitcoin’s put-to-call ratio climbs to a level not seen since last April. At 100.80k puts and 145.37k calls, Bitcoin’s current P/C ratio is 0.69.

Bitcoin total open interest all expirations. Image credit: laevitas.ch

Bitcoin’s Put/Call Ratio Paints a Bearish Picture

While not yet above 0.7, which would technically indicate bearish sentiment, the massive surge in puts is comparable to last year’s sell-out frenzy. What is clear is that open interest, like the total number of futures contracts, has reached a 12-month high.

Currently, investors who believe the price of Bitcoin will rise above the strike price, represented as call options, outnumber put options, which represent investors who believe the price of Bitcoin will fall below the strike price.

Either way, the high yearly open interest volume at 240,000 suggests a trend reversal or another hard sell-off weekend. According to market sentiment indicators, a high P/C ratio in the current bear market means investors are hedging against a sell-off.

Similarly, the Crypto Fear and Greed Index is still in the extreme fear range at 12 points, which is slightly higher than the 10 points last May, following the sell-off after Elon Musk tweeted that Tesla would no longer accept BTC payment because it is not green enough.

The Crypto Fear & Greed Index indicates a deep bear market. Image credit: alternative.me

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Correlation of Bitcoin losses with stocks amid uncertain macro factors

In two weeks, on June 10, another CPI (Consumer Price Index) report is due out. April’s inflation rate edged down to 8.3% from 8.5% the previous month. The market has widely viewed this as insufficient in the long run.

Indeed, it seems that the Federal Reserve should further accelerate its interest rate hike. This is indeed what happened with the publication of the FOMC meeting on Wednesday. The Fed Minutes (Federal Open Market Committee meeting) showed agreement that the federal funds rate should be raised by 50 basis points (0.5%).

“Most participants felt that increases of 50 basis points in the target range would probably be appropriate at the next two meetings,”

Overall, the Open Market Desk survey put an 80% probability for a 50 basis point increase, which would lift the interest rate range to a high of 3.13%. This is far more than previous surveys or market expectations. In other words, the Fed would move from a more neutral stance to a restrictive stance on economic growth.

After all, with a higher cost of capital, growth assets tend to be hit the hardest. This was amply demonstrated by Cathie Wood’s ARKK fund, which has fallen over -53.69% since the start of the year. In contrast, blue-chip stocks, as represented by the S&P 500 Index, fell only -13.67% over the same period.

Growth asset (ARKK) reliant on cheap capital versus a safer stock haven (SPY). Image Credit: Commercial View

However, over the past week both assets have rebounded, the S&P 500 at +5.63% and the ARKK at +4.10%. The same is not true for Bitcoin, which fell -5.77% for the week. Additionally, Bitcoin’s 30-day volatility, as a measure of its price fluctuation, increased to 4.22%, approaching last summer’s levels.

BTC/USD volatility over 30 days. Image credit: buybitcoinworldwide.com

All things considered, with so much futures volume accumulating, we may be looking at another weekend of imploded betting.

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Do you think people should avoid treating Bitcoin like a futures casino given the current state of volatility? Let us know in the comments below.

About the Author

Tim Fries is the co-founder of The Tokenist. He has a B.Sc. in Mechanical Engineering from the University of Michigan and an MBA from the University of Chicago Booth School of Business. Tim was a senior partner on the investment team in the US Private Equity division of RW Baird and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and control solutions.

Sallie R. Loera