Bitcoin plunged below $91,500 Monday.
(Bloomberg) — Bitcoin is in free fall — and traders are positioning for more pain.
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The world’s largest cryptocurrency plunged below $91,500 Monday, deepening a selloff that’s erased all of its gains for the year. In the options market, traders are making increasingly bearish wagers, on the conviction that the slide is far from over as deep-pocketed buyers beat a retreat.
The shift in sentiment has been swift and sharp. Demand for downside protection — particularly at the $90,000, $85,000 and $80,000 levels — has surged. Protective options expiring later this month are seeing especially heavy activity, according to data from Coinbase-owned Deribit.
After riding Bitcoin to the highs just weeks ago, traders have snapped up more than $740 million worth of contracts betting on continued declines expiring in late November — far outpacing interest in bullish positions.
“The absence of conviction-based spot demand has become increasingly apparent as buyers who accumulated positions over the last six months now find themselves significantly underwater,” said Chris Newhouse, director of research at Ergonia, a firm specializing in decentralized finance.
The pain has been concentrated in companies known as digital-asset treasuries — firms that stockpiled large amounts of cryptocurrencies earlier this year in an effort to become crypto-hoarding bets in the stock market. While Michael Saylor’s Strategy Inc. just bought another $835 million worth of Bitcoin, some of his corporate peers are facing growing pressure to sell assets to protect their balance sheets.
That selling has created a psychological overhang: A market crowded with investors who are too deep in the red to buy more, but not yet ready to cut their losses.
A sentiment index compiled by data-analytics platform CoinMarketCap — tracking price momentum, volatility, derivatives, and more — indicates crypto participants are mired in a state of “extreme fear.”
Larger economic forces are weighing on sentiment, too. Traders are eyeing Wednesday’s earnings from Nvidia Corp. — a bellwether for tech and speculative risk — as well as shifting expectations for a possible interest-rate cut from the Federal Reserve in December. The S&P 500 fell more than 1%, hitting sentiment for risk assets of all stripes.