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As the asset trades between $29,000 and $30,000, activity on bitcoin (BTC) options suggests growing bearish sentiment among investors.

Bitcoin has dropped to nearly $24,000 in the last week, owing to systemic risks in the cryptocurrency ecosystem and inflation fears in the broader market. As of Friday, the asset had fallen for seven weeks in a row.

In recent months, the asset's price movements have been highly correlated with those of the US stock market, with poor earnings reports and hawkish comments from the Federal Reserve affecting bitcoin prices.

Consequently, investors are placing bets.

The put/call ratio for bitcoin open interest hit a 12-month high of 0.72 yesterday, according to research firm Delphi, indicating "bearish sentiment among investors." Last May, similar ratio levels were reached.

In the note, Delphi analysts explained that "the put/call ratio measures the amount of put buying relative to calls." "A high put/call ratio indicates that investors are speculating on whether bitcoin will continue to fall in value, or that they are hedging their portfolios against a downward move."

"Before Bitcoin's price dropped over 50% in May 2021, the put/call ratio traded as high as 0.96 in April," the firm added.

CoinDesk - Unknown

Put/Call ratios reached a yearly peak on Thursday. (Delphi)

 

Put options are contracts that provide the option buyer the right, but not the responsibility, to sell a predetermined amount of an underlying asset at a predetermined price. Call options, on the other hand, allow call buyers to purchase an asset at a future date for a fixed price.

Over 63,000 bitcoin worth of open interest on options slated to expire on May 27 at the time of writing.

CoinDesk - Unknown

May 27 would see the expiry of over 63,000 in bitcoin options. (Skew)

 

According to data from analytics tool skew, Thursday's increase in put/call ratios topped prior 2022 highs of 0.69 in February and is up 38% from one-year lows of 0.44 in December.

Deribit, a cryptocurrency exchange, has the most open interest in options, with over $7 billion as of May 17. These figures represent a rebound from late last month, when open interest fell by $2 billion in two days from April 28 to April 30.