Institutional investors capitalized on the decline as Bitcoin fell significantly below $50,000.

Crypto traders have swiftly returned to making optimistic wagers on Bitcoin within the options market, even after the recent market downturn that led to billions in liquidations, as reported by Bloomberg News, referencing market analysts.

Bitcoin dropped to a low of $48,818 on August 5, marking its lowest point since February, amid rising concerns regarding a recession and possible conflict in the Middle East. Nevertheless, in spite of the significant drop, institutional investors began to accumulate positions as the price decreased.

The report indicates that traders have been purchasing call options on both offshore exchanges and US over-the-counter desks, which provide the right to acquire Bitcoin at $90,000 or more later this year.

On August 4, around $1.1 billion in crypto positions were liquidated, representing one of the largest selloffs of the year, according to Coinglass. Bitcoin experienced a decline of up to 17%, while Ethereum faced losses exceeding 20% during Asian trading hours.

However, both cryptocurrencies began to rebound by August 6 as investors re-entered the market at lower prices, suggesting strong buying pressure below $50,000.

As of the latest update on August 8, Bitcoin was trading at $59,350 after increasing by another 8.31% over the previous 24 hours, according to CryptoSlate data.

Institutional traders buy the dip

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

Feldman stated:

“People got extremely liquidated on longs; it was horrific. But by Monday and Tuesday, US hedge funds and institutional participants using OTC desks began making bullish options bets again by purchasing call spreads on Solana and Bitcoin.”

He noted that the heightened demand for Bitcoin on Coinbase has contributed to the recovery. Feldman further elaborated that the bid-to-offer ratio, which assesses the total volume of buy orders for Bitcoin against those looking to sell, reveals a significant imbalance.

This suggests a considerable number of buyers are positioned at $49,000 and below.

Lower in the short-term

In the meantime, short-term hedging against a price decline has surged on offshore exchanges recently. The put-to-call ratio on Deribit remains high, with more puts being acquired than calls in the last 24 hours.

According to Feldman, retail investors on these platforms tend to engage in crypto trading with more hedging in options compared to US-based institutions that generally maintain large Bitcoin holdings and utilize OTC desks.

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

“While short-term skews heavily favor puts, post-election skews remain inclined toward calls even after the steep selloff. Traders continue to anticipate a bullish second half of the year for Bitcoin, as they have throughout most of the year.”

Doshi observed that currently, the September $90,000 calls, December $100,000 calls, and March $100,000 calls possess the largest open interest strikes in the listed market, with nearly $1 billion in notional value for these three options combined.

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