Bitcoin options show recovery after euphoria at the top

The recent Bitcoin rally to $66.900 was, according to Glassnode data, not a sign of genuine demand but the result of short covering and the unwinding of put options. Once the price peaked on 21 July, the protection premium in the options market had virtually disappeared, a pattern also seen earlier in January.

Bitcoin is available at OKX and Bybit.

In brief:

• The Bitcoin price rise to $66.900 was mechanically driven by the closing of short positions and put options, not by structural buying power.
• The delta skew in the options market fell to just +1.5% at the top, pointing to complacency.
• After the rejection below $69.000, demand for downside protection is recovering again.

Euphoria at the top

The Glassnode chart shows that the so-called 25 Delta Skew, a measure of how much extra traders pay for downside protection via options, collapsed around the rally peak. At the high point on 21 July, that premium had fallen from roughly 18% to just +1.5%. This means that almost no one was willing to pay for protection against a price decline. Analyst n3ocortex calls this textbook complacency.

According to the analysis, the rally itself was mechanical in nature over a three-week period. Shorts were closed and put positions unwound, pushing the price higher without any sustainable buying pressure from the market. Such price movements look strong on the surface, but lack the underlying foundation of genuine demand.

Rejection below $69.000 turns the tide

After the Bitcoin price failed to hold above the short-term cost level of $69.000, sentiment quickly reversed. The rejection at that level caused demand for protection against further price declines to return within a few days. The chart shows that the 1-month skew has now risen back to 15.1% and the 1-week skew to 13.4%.

This means traders are once again willing to pay a hefty premium for put options. The options market thus shows that the brief complacency at the top has given way to a more cautious stance. Whether this increased demand for protection actually points to a further price decline or is purely defensive in nature remains unclear for now.