A bear market offers investors three choices: buy on the dip, sell at a loss, or HODL through the FUD.
From a technical perspective, Bitcoin has been consolidating around $60,000 for almost two weeks, which could be a sign that buyers are finally taking action.
According to market makers, dip buyers have historically piled in around this cost basis, allowing Bitcoin to reach a bottom before smart money triggers a recovery.
However, recent whale activity paints a different picture. One analyst spotted a whale that had just sold 800 BTC, making a loss of about $35 million.
The investor bought the entire position near last November’s peak for about $107,000 per coin, held it through seven months of decline, and finally sold today for about $62,000.
In this case, it appears that some investors are choosing to sell at a loss.
And the broader market data seems to support this. Looking at the chart above, the amount of Bitcoin supply held at a loss has increased to 10.56 million BTC, overtaking the previous peak of 10.47 million BTC.
Simply put: about half that of Bitcoin [BTC] The circulating supply is now underwater, showing the pressure holders are under at current prices.
However, as signs of capitulation begin to appear, it is clear that investor patience is running thin. That is why the claim that Bitcoin has already dropped around $60,000, which may be early.
Against this backdrop, traders piling into BTC put options don’t look random. Instead, it looks more like a hedge against the risk of one more leg lower before Bitcoin finds a more convincing bottom.
Bitcoin options markets are signaling rising demand for downside protection
The Bitcoin options market is starting to heat up.
For context, a rise in options activity is usually a signal that traders are preparing for a bigger move in either direction. But this time the flow appears to be bearish, with more traders turning to put options.
That suggests that some market participants are either hedging against further negative consequences or actively betting that BTC has more room to fall.
As the chart below shows, Bitcoin’s Options Open Interest has risen to a monthly high of $36 billion. The biggest single-day jump occurred on June 18, marking the sharpest increase in options positioning so far this month.
More specifically, one trader be shows that Deribit traders have been engaging in short-term puts targeting $60,000 in early July, $55,000 by July 10 and as low as $52,000 by the end of the month.
Taken together, the rise in Open Interest and growing demand for downside protection suggest that traders are preparing for the possibility of another move lower before Bitcoin can reach a bottom.
Given the recent rise in unrealized losses, increasing signs of capitulation, and continued uncertainty around key support levels, the increase in bearish positioning does not seem entirely surprising.
Instead, it appears that traders are starting to ‘strategically’ position themselves for a possible move towards $52,000 by the end of July.
Final summary
- Nearly half of Bitcoin holders are currently experiencing losses, showing increasing signs of market capitulation.
- Options traders are increasingly betting on more downside, with some targeting a move to $52,000 by the end of July.