Crypto Traders Brace for August Storm as Bitcoin and Ethereum Put Options Skyrocket

Fear grips crypto markets as traders load up on downside protection.

Bitcoin and Ethereum options markets flash red ahead of August expiry, with put volumes dwarfing calls. Is this the calm before another crypto winter—or just hedge funds playing their usual games?

Derivatives data reveals a lopsided bet against crypto's top assets. Market makers report record put/call skews not seen since last cycle's capitulation event. 'Everyone's hedging for disaster,' says one OTC desk trader, 'but nobody wants to say it out loud.'

Technical indicators suggest trouble brewing. Open interest in protective puts now exceeds 70% of total options volume across major exchanges. The last time ratios hit these levels? December 2022—right before that 45% BTC nosedive.

Yet some whales smell opportunity. 'When retail panics, smart money accumulates,' quips a pseudonymous derivatives trader stacking ETH strangles. Their bet? Volatility will crush over-leveraged positions on both sides.

As always in crypto, the only certainty is uncertainty. Will August deliver another brutal correction or just another round of 'hedge fund theater'? Place your bets—responsibly, of course. (Or don't, and just watch the show with popcorn instead of your life savings.)

Bitcoin bearish sentiment

According to data shared with CryptoSlate, open interest in Bitcoin put options with an Aug. 29 expiry date is nearly five times higher than call options.

Investors typically buy call options when they expect the asset’s price to increase. Conversely, they buy put options when they anticipate a decline in the asset’s value.

Notably, about 50% of that Derive’s put activity is concentrated around the $95,000 strike, while another 25% is split between $80,000 and $100,000.

Further confirmation comes from data from Deribit, a leading centralized derivatives exchange, where put options at the $110,000 and $95,000 strike prices account for over $2.8 billion in open interest.

This suggests traders are increasingly betting on a MOVE below the six-figure mark.

Moreover, options skew, a measure comparing the cost of puts to calls, has shifted from +2% to -2% in the past month, reflecting a growing appetite for downside protection.

This shift in sentiment aligns with probability models that place an 18% chance on BTC revisiting $100,000 before the end of the month.

Ethereum volatility rises

Ethereum is also experiencing an increase in bearish sentiment, though to a lesser degree than Bitcoin.

Derive data shows that for the Aug. 29 expiry, put options outnumber calls by just over 10%.

The highest concentration of put activity is around the $3,200, $3,000, and $2,200 strike levels, suggesting traders are bracing for anything from mild declines to more significant drops in Ethereum’s price.

Moreover, ETH’s 30-day skew has dropped from +6% to -2%, suggesting a similar pattern of growing interest in downside protection.

Meanwhile, Ethereum’s monthly volatility remains higher, with an expected volatility of 65%, compared to Bitcoin’s 35%. This suggests Ethereum could experience a bumpier ride than Bitcoin in the weeks ahead.

Considering this, crypto traders on Derive have placed a 25% chance of ETH falling below $3,000 this month. However, with recent price rebounds, the odds of a close above $4,000 have doubled to 30% over the past week.