Crypto Options Signal Near-Term Bearish Sentiment for BTC and ETH

The cryptocurrency derivatives market is signalling bearish sentiments for major crypto assets like Bitcoin (BTC) and Ethereum (ETH) , according to a new report from crypto exchange Bybit and analytics platform Block Scholes. The report highlights a significant increase in implied volatility levels across various expiration dates for both Bitcoin and Ethereum short-term options contracts, indicating increased near-term uncertainty.

The derivatives markets are showing a clear bias towards out-of-the-money put options for both Bitcoin and Ethereum in the short term. This trend reinforces a strengthening short-term bearish outlook as spot prices struggle to recover from recent declines.

For Bitcoin options, there's now a higher level of open interest in put options compared to calls, indicating that traders are positioning themselves for potential downside moves. This development coincides with a decline in total open interest for perpetual swaps following the most recent sell-off.

Nathan Thompson, Bybit's lead technical writer, explained , "Implied skew—the difference in implied volatility between out-of-the-money puts and calls—can reveal current market sentiment for BTC and ETH options." He added, "Right now all signs emanating from options markets suggest there is greater downside."

The bearish sentiment isn't confined to Bitcoin and Ethereum. Solana (SOL) has been experiencing consistently negative funding rates for perpetual swaps over the past week. Thompson suggests that such rates indicate a bottom might be forming, and even if SOL dips lower, it's unlikely to drop significantly from current levels.

The report also points out that after the August 30 options expiration date, open interest for call options has decreased greater than OI for puts. This, combined with recent price drops and the failure of spot prices to recover, has contributed to the pessimistic outlook for the markets.