Bitcoin options market prices in higher downside risk ahead of Christmas

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Bitcoin options downside risk

Highlights

Implied probability of bitcoin finishing above $80,000 by Christmas drops to 26% from 53% as traders increase demand for puts.
Bitcoin options trading on Derive jumps 37% to $418 million last week, with puts making up 55% of premiums versus 36% previously.
Perpetual futures open interest rises 12% to 353,000 BTC as bitcoin declines 10%, raising squeeze risk due to elevated leverage and recent macro pressures.

Options positioning turns more defensive

As reported by The Block, data cited from Derive show Christmas-dated bitcoin options have turned notably more bearish over the past week as traders increase demand for downside protection.

Derive founder and CEO Nick Forster said the implied chance of bitcoin finishing above $80,000 by Christmas has fallen to 26% from 53% a week earlier. Over the same period, the probability of a sub-$70,000 finish has risen to 31% from 15%.

Forster said puts are now costing more than equivalent calls, a sign that traders are becoming more defensive. Bitcoin options trading on Derive totals $418 million last week, up 37%, and puts account for 55% of premiums traded versus 36% in the previous week.

He also pointed to a large hedge placed shortly before Thursday's technology-led sell-off, when a wallet spends about $14,000 to protect 300 BTC against a drop below $60,000 by Nov. 27. According to Forster, that position could pay as much as $3 million if bitcoin falls below $50,000.

Macro data and leverage raise squeeze risk

Bitcoin falls back below $74,000 on Tuesday after October's U.S. consumer price index comes in above expectations, with prices rising 0.4% for the month versus forecasts of 0.3%. Futures traders then price in further Federal Reserve tightening at the December meeting, adding pressure after more than $1 billion in crypto long liquidations on Monday when bitcoin drops below its 50-week moving average.

K33 says perpetual futures open interest stands at about 353,000 BTC on Tuesday, a level exceeded on only 1.2% of trading days over the previous two years. Over the past 30 days, open interest increases 12% while bitcoin loses 10%, bringing positioning back near levels last seen around the October 2025 peak.

Vetle Lunde, K33's head of research, says the current setup leaves bitcoin ripe for a squeeze. He says a breakdown could trigger heavy long liquidations, while a rebound could force short covering, potentially magnifying price swings as leveraged positions unwind.

This adds to earlier discussion around UBS Fed outlook, which projected rate hikes extending into 2027 after an inflation surprise.

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