Bitcoin, Ether Slide as Hedging Reduces Demand Amid FTX Token Sale

Crypto market leaders Bitcoin (BTC) and Ether (ETH) abandoned relative calm and faced selling pressure early Tuesday as FTT, the native token of cryptocurrency exchange FTX, dived to 21-month lows on ongoing concerns about the Alameda trading firm’s balance sheet.

At 4:30 UTC, bitcoin was trading 4.3% lower on the day at $19,700, while ether changed hands at $1,480, down 5.5%, CoinDesk data showed.

FTX’s FTT token fell 20% to $17, its lowest level since February 2021, extending last week’s 13% decline.

Options data showed renewed demand for bearish put options on Bitcoin and Ether. The bearish shift in sentiment perhaps reflects investor concerns that the ongoing FTX-Alameda drama could lead to a Terra-like contagion of crypto collapse.

A call option gives the buyer the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a specified date. A put option gives the right to sell.

“We’ve seen renewed demand for downside protection following the negative news flow surrounding the FTSE,” Patrick Chu, director of institutional sales and trading at OTC crypto derivatives technology platform Paradigm, told CoinDesk.

“The short-dated skew in particular has moved in favor of puts as we’ve seen downside protection in both BTC and ETH with strong demand for late November/December,” Chu added.

The chart shows renewed demand for bearish put options.  (Amberdata)

The chart shows renewed demand for bearish put options. (Amberdata)

Both the short-term and long-term Bitcoin call-put skews, measuring prices for bull calls versus puts, have declined from zero this week. The one-week swing fell from -1% to -12%, the lowest level since late September, according to digital asset data provider Amberdata.

In other words, puts are back in demand.

A similar pattern is observed in ether call-put skews.

The one-week swing declined to -20%, reflecting increased demand for short-term puts.  (Amberdata)

The one-week swing declined to -20%, reflecting increased demand for short-term puts. (Amberdata)

The one-week Ether call-put skew fell to nearly -20%, marking the strongest bearish put deviation since mid-September.

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