CF Benchmarks’ analysis of options on Bitcoin (BTC) futures traded on the Chicago Mercantile Exchange (CME) reveals that investors are still willing to pay a premium for short-term downside protection, even in light of yesterday’s softer U.S. Consumer Price Index (CPI) inflation report.
According to CF Benchmark analysts, although Bitcoin experienced a breakout above $66,000 following the release of the inflation data, there is still a higher implied volatility for out-of-the-money (OTM) put options compared to calls. This indicates that derivatives traders are willing to pay elevated premiums for the OTM puts, suggesting a bearish short-term market sentiment. The increased implied volatility for OTM puts reflects traders’ hedging against a potential decline in bitcoin’s value.
While the short-term outlook appears bearish, the analysts note a “flatter” volatility curve for longer-dated puts and calls, with a slight skew towards calls. They suggest that this suggests investors hold a more optimistic view of Bitcoin’s longer-term prospects. They further state that it will be interesting to observe if the skew towards calls increases should expectations of disinflation accelerate following the favorable CPI report.
Meanwhile, according to reports from the Financial Times, the CME Group is reportedly considering the launch of Bitcoin spot trading alongside its existing futures products. The move aims to cater to traders who prefer dealing with cryptocurrencies on a regulated platform. The introduction of spot trading on CME would allow traders to profit from basis trades, exploiting the price difference between futures contracts and the underlying asset’s spot price. However, the plan has not been finalized.