Bitcoin $60K Retest Chances Rise As Carry Options, ETF Flows Show Fear

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Professional traders are paying a 13% premium for downside protection as Bitcoin struggles to maintain support above $66,000.

While stocks and gold remain strong, the $910 million outflow from the Bitcoin ETF suggests that institutional investors are becoming increasingly wary.

Bitcoin (BTC) price entered a downward spiral after rejecting around $71,000 on Sunday. Despite the successful defense of the $66,000 level during the week, options markets reflect rising fears as professional traders avoid lower price exposure.

Despite the relative strength in the stock market and gold prices, traders appear to be effectively betting on a retest of $60,000 rather than overreacting to Bitcoin price declines.

Bitcoin put options traded at a 13% premium to call (buy) instruments on Thursday. Under neutral conditions, the delta skew metric typically ranges between -6% and +6%, indicating the need for balanced inversion and downside strategies. The fact that these levels have held for the past four weeks indicates that the sentiment of experts is leaning towards caution.

This bearish bias is evident in the neutral-to-bear position seen in Bitcoin options. According to Levitas data, bearish diagonal expansion, short straddle and short risk reversal were the most traded strategies on Deribit exchange in the last 48 hours.

The first bear bet minimizes costs as the short-term option loses value quickly, while the second maximizes profits if the bitcoin price barely moves. A short risk aversion, on the other hand, offers profits from the downside with little to no upfront cost.

Weak institutional demand for Bitcoin ETFs exacerbates discontent

Analysts often look to China's stable currency to better gauge traders' appetite. This indicator usually drops below par as investors rush to exit the cryptocurrency market.

Under neutral conditions, a stable coin should trade at a 0.5% to 1% premium to the US dollar/yuan exchange rate. This premium covers the high costs of traditional FX conversion, currency exchange fees and regulatory friction caused by China's capital controls. The current decline of 0.2% suggests modest outflows, although this is an improvement from the 1.4% decline seen on Monday.

The current discontent among traders can be partially explained by the lack of flow in Bitcoin exchange-traded funds (ETFs), which serve as a proxy for institutional interest.

Related: Despite recent outflows, Bitcoin ETFs still sit at $53B in net proceeds–Bloomberg

U.S.-listed Bitcoin ETFs have seen a total of $910 million in outflows since Feb. 11, which may be out of balance, especially as Bitcoin trades 47% below its all-time high and gold hovers near $5,000, up 15% in two months. At the same time, the S&P 500 index is just below the peak of 2%, indicating that risk aversion is mostly limited to the cryptocurrency sector.

While Bitcoin options indicate the fear of further decline, traders remain very cautious until a clear reason for the risk of $60,200 on February 6 comes.