Bitcoin derivatives traders are bracing for a short-term correction in BTC, despite the recent softer inflation report. Analysis from CF Benchmarks shows that options on Bitcoin futures traded on the Chicago Mercantile Exchange (CME) indicate that investors are still paying a premium for short-term downside protection.
Following the release of the U.S. Consumer Price Index (CPI) inflation report, Bitcoin surged past $66,000. However, CF Benchmark analysts note that implied volatility is higher for out-of-the-money (OTM) put options compared to calls. This indicates that traders are willing to pay higher premiums for OTM puts, reflecting a bearish short-term market sentiment and a hedge against a potential drop in Bitcoin’s value.
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Despite the bearish short-term outlook, the analysts highlight a “flatter” volatility curve for longer-dated puts and calls, with a slight skew towards calls. This suggests that investors are more optimistic about Bitcoin’s long-term prospects. They also note that it will be interesting to see if the skew towards calls increases if expectations for disinflation grow following the positive CPI report.
Meanwhile, the Financial Times reports that CME Group is considering launching Bitcoin spot trading alongside its existing futures products. This move would cater to traders who prefer trading cryptocurrencies on a regulated platform and allow them to profit from basis trades by exploiting price differences between futures contracts and the spot price of the underlying asset. However, this plan is still under consideration and has not been finalized.
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