BTC Put/Call Ratio At 0.69: Traders Fear BTC Will Dip Further

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

Bitcoin’s Put/Call Ratio Paints a Bearish Picture

While not yet over 0.7, which would technically indicate a bearish sentiment, the massive rise in puts is comparable to last year’s liquidation spree. What is clear is that open interest, as the total number of futures contracts, reached a 12-month high.

At the moment, investors who think Bitcoin’s price will exceed the strike price, represented as call options, outnumber put options, which represent investors who think Bitcoin’s price will fall under the strike price.

Whatever the case may be, yearly high open interest volume at 240k suggests a trend reversal or another brutal liquidation weekend. As market sentiment indicators go, an elevated P/C ratio in the current bear market means that investors are covering themselves in the case of a sell-off.

Likewise, the Crypto Fear and Greed Index is still within the extreme fear range, at 12 points, which is just slightly higher than last May’s 10 points, following the selloff after Elon Musk tweeted that Tesla would no longer accept BTC payment because it is not eco-friendly enough.

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Bitcoin Losses Correlation to Stocks Amid Uncertain Macro Factors

In two weeks, on June 10, another CPI (consumer price index) report is scheduled for release. April’s inflation rate slightly decreased to 8.3%, compared to the previous month at 8.5%. The market largely saw this as insufficient in the long run.

Effectively, it seems like the Federal Reserve would have to ramp up its interest rate hike further. This is indeed what happened with Wednesday’s release of the FOMC meeting. The Fed minutes (Federal Open Market Committee meeting) showed an agreement that the fed fund rate would have to be increased by 50 basis points (0.5%).

“Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,”

Overall, the Open Market Desk survey put an 80% probability for a 50-basis-point increase, which would elevate the interest rate range to a peak of 3.13%. This is much higher than previous surveys or the market expectations. In other words, the Fed would move from a more neutral stance to one that is restrictive to 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 dropped by over -53.69% year-to-date. In contrast, blue-chip stocks, represented by the S&P 500 index, went down only by -13.67% for the same period.

However, during the last week, both assets rallied, S&P 500 at +5.63% and ARKK at +4.10%. The same is not true of Bitcoin though, which dropped by -5.77% for the week. Moreover, Bitcoin’s 30-day volatility, as a measure of its price fluctuation, increased to 4.22%, getting closer to last summer’s levels.

All things considered, with so much futures contract volume amassed, we may be looking at another weekend of imploded bets.

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

About the author

Tim Fries is the cofounder 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 served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.