Crypto Traders Remain Cautious About Downside Risks in Bitcoin, Ether; SOL Stands Out

Despite ongoing optimism, there is lingering apprehension among traders that the prices of Bitcoin and Ether might weaken in the near future. This is suggested by risk reversal patterns in options trading.

In simpler terms, when call options cost more than put options, it implies optimism in the market (bullish sentiment), as people are willing to pay more for the potential of higher prices (price rallies). Conversely, if puts are more expensive, it suggests a more cautious or bearish outlook, as people prefer to protect themselves against possible price drops. Call options enable one to make a profit from or shield against rising prices, while puts provide protection during market downturns.

According to Singapore-based QCP Capital, options trading on Deribit shows a bias for puts.

Based on the speed at which the market dipped last week, there remains a high level of caution regarding potential losses, as indicated by the QCP market insights team during their recent broadcast on Telegram. In the upcoming months, particularly up until October, it appears that options favoring a decrease (puts) are more likely in both Bitcoin and Ethereum.

On Friday, traders began purchasing put options due to worries about a potential recession sparked by a disappointing U.S. jobs report. This led to increased caution within the financial marketplaces.

Based on Stewart’s analysis, the trends in the options market suggest a potential drop in Bitcoin price to as low as $50,000 or possibly even $40,000. Currently, Bitcoin is valued at approximately $57,000, according to CoinDesk’s latest data.

It seems that the cautious attitude may originate from past trends, where economic downturns and increased risk aversion have often followed a period when the Federal Reserve lowered interest rates. Next week, it’s anticipated that the central bank will reduce rates by a quarter of a percent.

According to Alex Kuptsikevich, a senior analyst at The FxPro, price surges might not last long before the Fed’s meeting.

According to Kuptsikevich, there seems to be a preference for caution and selling growth stocks in the market, which is likely to persist until the U.S. inflation data comes out on Wednesday. This cautious sentiment might carry on till the Fed’s interest rate decision on September 18th.

Investors are taking steps to safeguard against potential losses in Ethereum, yet they also seem eager about the possibility of gains in Solana. This contrast suggests a market that is cautiously spreading its investments,” said Kristian Haralampiev, structured products lead at Nexo, in an email to CoinDesk.

Furthermore, it’s worth noting that Ethereum’s volatility level is significantly higher than Bitcoin’s, suggesting possible choppy waters in the near future for Ethereum, as per Haralampiev’s statement.