Options Data Indicates Bearish Sentiment in Crypto Markets, Traders Betting on Lower Ether Price

The crypto market has been experiencing a rollercoaster ride this week, with ether, the second largest cryptocurrency by market capitalization, taking a significant hit with a loss of over 11% in the past seven days. The options data is now revealing some interesting insights into the sentiment in the crypto markets.

According to a note from crypto hedge fund QCP Capital, traders are increasingly nervous as the downside skew in ETH risk reversals deepens to -20%. This indicates that traders are betting on a lower ether price in the near future. The volatility skew, which measures the difference in implied volatility for different strike prices, is also at a peak level of fear at 17%.

The ongoing Iran-Israeli conflict and weakness in US equities are further exacerbating the risk-off sentiment in the market. Perpetual funding rates for altcoins are negative, leading to the liquidation of long leveraged trades. Analysts at QCP Capital suggest a defensive approach to buying BTC or ETH at a significant discount to the spot price.

Zaheer Ebtikar, founder of crypto hedge fund Split Capital, highlighted that more than half of the open interest on altcoins worth $9 billion was wiped out last week. Despite a medium-term bearish outlook, some traders are still betting on an ETH bounce as it serves as a proxy for the alt market.

The current volatility setup could see ether moving sharply in either direction based on historical price movements. As traders navigate through these uncertain times, it’s crucial to pay attention to the options data and sentiment in the market to make informed decisions.