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Analysts suggest that Bitcoin derivatives traders are willing to pay a premium for short-term downside protection, despite a more optimistic outlook for longer-term options distributions.
CF Benchmarks’ analysis of Chicago Mercantile Exchange (CME) options on bitcoin futures reveals that investors continue to pay elevated premiums for out-of-the-money (OTM) puts, indicating a bearish sentiment in the short term. This trend persists even after a softer U.S. Consumer Price Index (CPI) inflation report.
The analysts highlight a “flatter” volatility curve for longer-dated options, with a slight skew towards calls. This suggests a more positive outlook for Bitcoin’s longer-term prospects. They note that increased institutional involvement may contribute to this trend, as institutional investors tend to exhibit less extreme swings in sentiment.
Options, which provide traders with the right but not the obligation to buy or sell an underlying asset at a predetermined price, are being closely monitored for indications of market sentiment. While call options imply a bullish stance, put options suggest a bearish sentiment.
In related news, the Financial Times reports that the CME Group is considering launching bitcoin spot trading alongside its existing futures products. This move would cater to traders seeking regulated platforms for cryptocurrency transactions and could enable profit opportunities through basis trades, leveraging the difference between futures prices and spot prices.
While the launch of bitcoin spot trading on CME has not been finalized, it underscores the growing interest in regulated cryptocurrency trading platforms. CME Group, already a major player in bitcoin futures trading, declined to comment on the potential expansion.
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