BTC Open Interest For Puts Surges As Traders Hedge Possible SEC Denial of Bitcoin ETF

Bitcoin (BTC) traders have increasingly gained exposure to put contracts as a hedge on the SEC, potentially denying a spot-based Bitcoin ETF. 

The cryptocurrency market has surged since the final quarter of the year, with anticipation that the United States Securities and Exchange Commission (SEC) will approve the first set of spot Bitcoin ETFs.

Many analysts and market participants expect the approval to come as soon as January 10, with the date earmarked as the earliest date for the agency to announce its decision.

However, ahead of that critical date, many Bitcoin investors have turned to put contracts as a way to hedge against whatever decision the agency announces. Puts are a form of derivative products that give holders the chance to sell an asset at a specified date and price range.

Data from leading crypto derivatives platform Deribit shows that user demand for puts expiring on January 12, two days after the landmark decision, has surged. Open interest on the contracts has surpassed $258 million, with the put-to-call ratio standing at 0.70. 

A high put-to-call ratio suggests that traders are bearish around the specified expiry date. For context, Put-to-call ratios for January 5 and 29 contracts stand at 0.33 and 0.52, respectively.

As the above chart shows, the highest prices for put contracts with the most open interest are $40,000, $42,000, and $44,000. This suggests that traders are willing to sell BTC at these prices on the said date to minimize losses if BTC sees a substantial decline following the SEC’s decision.

Bitcoin Enters Crucial Weeks

With Bitcoin trading around $43,600 at the time of writing, the strike price on the January 12 contract also hints at the overall bullish outlook for BTC.

It largely indicates that traders anticipate that the cryptocurrency’s price will trade significantly higher ahead of the decision, hence a willingness to sell around the current BTC market value.

The coming weeks appear extremely crucial for Bitcoin’s price in the short and long terms. Approval of the ETF would legitimize the asset class and push it to mainstream consciousness, while a denial, even though unlikely at this stage, would likely have a lasting impact on Bitcoin.