Institutional investors bought the dip despite Bitcoin’s steep crash below $50,000

Crypto traders have quickly returned to optimistic bets on Bitcoin in the options market despite the recent market crash that resulted in billions of dollars in liquidations, Bloomberg News reportedwith reference to market experts.

Bitcoin fell to a low of $48,818 on August 5, the lowest since February, amid rising fears of a recession and possible war in the Middle East. However, despite the sharp decline, institutional investors started buying in as the price fell.

According to the report, traders bought call options on both offshore exchanges and US over-the-counter desks, giving them the right to buy Bitcoin for $90,000 or higher later this year.

On August 4, approximately $1.1 billion in crypto holdings were liquidated, which is one of the biggest sell-offs of the year, according to Coinglass. Bitcoin fell as much as 17%, while Ethereum saw losses of more than 20% during Asian trading hours.

However, both cryptocurrencies started to recover on August 6 as investors bought back into the market at lower prices, indicating high buying pressure below $50,000.

At press time on August 8, Bitcoin was trading at $59,350, having risen another 8.31% in the past 24 hours, based on CryptoSlate facts.

Institutional traders buy the dip

Yevgeniy Feldman, the co-founder of SwapGlobal, which offers prime brokerage and swaps to institutional investors, told the news outlet that about 50% of open interest in crypto derivatives was liquidated during this downturn.

Veldman said:

“People became extremely liquidated by longs; it was horrible. But on Monday and Tuesday, US hedge funds and institutional participants using OTC desks again began placing bullish option bets by buying call spreads on Solana and Bitcoin.”

He added that increased demand for Bitcoin on Coinbase has driven the upswing. Feldman further explained that the bid-to-ask ratio, which measures the total number of Bitcoin purchase commitments compared to those willing to sell, shows a significant imbalance.

This indicates that a significant number of buyers are waiting for $49,000 and below.

Lower in the short term

Meanwhile, short-term hedging at a lower price has surged on offshore exchanges in recent days. The put-to-call ratio on Deribit remains high, with more puts bought than calls in the last 24 hours.

According to Feldman, retail investors on these platforms tend to trade crypto with more hedging in options compared to US-based institutions that typically hold large Bitcoin positions and use OTC desks.

Additionally, Ravi Doshi, head of markets at prime broker FalconX, told Bloomberg:

“While short-term skews strongly favor puts, post-election skews continue to lean toward calls even after the steep sell-off. Traders continue to anticipate a bullish second half of the year for Bitcoin, as they have done for most of the year.”

Doshi noted that currently the calls of $90,000 in September, $100,000 in December and $100,000 in March represent the largest open interest strikes in the listed market, with a notional value of almost $1 billion for these three options alone.

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