Bitcoin (BTC) and Ether (ETH), the two leading cryptocurrencies, have bounced nearly 10% from their recent lows, driven by positive signals from key order book metrics and anticipation of a Federal Reserve interest-rate cut next week. Despite this rebound, traders are wary of potential short-term weakness, as indicated by options-based risk reversals for both assets.
Risk reversals measure the cost of call options versus put options. A positive risk reversal suggests that call options are more expensive, reflecting bullish sentiment, while a negative risk reversal indicates a bearish outlook. Current options data from Deribit shows a bias towards put options for both Bitcoin and Ether, signaling caution in the market.
QCP Capital’s market insights team noted in a Telegram update, “Given the speed of last week’s decline, the market remains cautious about downside risks. Risk reversals through October still favor puts for BTC and ETH.”
Traders turned to put options on Friday following a disappointing U.S. nonfarm payrolls (NFP) report, which rekindled recession fears and led to increased risk aversion. Deribit Insight’s Tony Stewart observed, “The NFP report failed to reassure markets. Traders have been adding to puts, with significant interest in one-week $49-$53k puts when Bitcoin was below $55k.”
Stewart added that recent options activity suggests concerns that Bitcoin might drop to $50,000 or even $40,000. At the time of writing, Bitcoin was trading around $57,000, according to CoinDesk data.
This cautious sentiment may be influenced by historical patterns showing that recessions and increased risk aversion often follow the initiation of a Fed rate-cutting cycle. The central bank is expected to reduce rates by 25 basis points in its upcoming meeting.
Alex Kuptsikevich, senior analyst at The FxPro, suggested that price rallies might be short-lived until the Fed’s decision. “We expect caution and a tendency to sell growth to prevail in the market until the release of U.S. inflation data on Wednesday and the Fed’s rate decision on September 18th,” Kuptsikevich said in an email.
In contrast, Solana’s SOL has shown relative resilience and is expected to outperform Ether in the near term. According to Amberdata, SOL’s one-month options skew—measuring demand for call options versus puts—crossed above zero early Tuesday, while Ether’s one-month skew remained near -2%, indicating a preference for put options.
Kristian Haralampiev, structured products lead at Nexo, commented, “Traders are actively protecting downside risk in Ethereum while showing appetite for upside potential in Solana. This divergence reflects a market that is hedging its bets.” Haralampiev also noted that Ethereum’s volatility index is notably higher than Bitcoin’s, suggesting potential turbulence ahead for ETH.
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