Bitcoin ETF holders and corporate treasuries – the players everyone praises for their long-term vision – are stacking insurance against a price drop below $60,000, cryptocurrency exchange Deribit told CoinDesk.
“ETF holders and corporate treasuries buy 6-month and 1-year puts at $60,000 or less ($60,000 put, a derivative contract offering protection against a possible fall in prices below this level) as portfolio insurance,” Jean-David Péquignot, commercial director of derivatives exchange Deribit.
This put option works like insurance: it allows buyers to sell bitcoin at $60,000 even if the price falls, protecting ETF investors and corporate treasuries with BTC from greater losses while they hold for the long term.
Pequignot was responding to questions about the growing interest in the $60,000 put option. At the time of writing, these contracts had $1.50 billion in open interest – the highest of all strikes and expirations on Deribit. On the stock market, a contract represents one BTC. The platform accounts for nearly 80% of global crypto options activity.
The surge in interest for $60,000 puts expiring in six months or more signals deep fears that any price rebound could peter out quickly, setting the stage for a steeper decline.
What makes this coverage even more remarkable is that ETF holders and corporate treasuries have a significant supply of bitcoin.
In recent years, investors have poured billions into U.S.-listed spot Bitcoin ETFs and similar products around the world. US funds alone saw inflows of 1.26 million BTC, or approximately 6% of the total circulating Bitcoin supply. Meanwhile, publicly traded companies hold around 1.14 million BTC, or 5.7% of the BTC supply.
Bitcoin is trading below $70,000, after hitting a low of nearly $60,000 earlier this month, according to CoinDesk data. The cryptocurrency has gained nearly 5% since Wednesday to trade near $67,500, but the options market remains unimpressed, with puts continuing to trade at a significant premium to calls or bullish bets.
“While the spot price has climbed, the delta 25 risk reversal has remained stubborn. 30-day puts still trade at a volatility premium of about 7% over calls, indicating that the smart money continues to pay to protect against downside rather than chasing the pump,” Péquignot said.
He added that volatility could increase as prices fall below $63,000. In effect, brokers and market makers who create liquidity in the order book are “short” at $60,000 or less.
This means that as prices approach $60,000, these entities can sell more to rebalance their overall exposure to neutral, inadvertently adding to the downside volatility.
