Bitcoin Options Market at Three-Year Extreme as Institutions Sell and Governments Buy

The Bitcoin options market has reached its most defensive positioning since November 2022, despite no comparable fundamental crisis in crypto markets or the broader economy. According to Binance Research's weekly report, this is evident from the BTC options 25-delta skew index, which measures the relative cost of downside put protection versus upside calls and has hit its most negative reading since November 2022.

The current environment lacks any equivalent fundamental shock, such as a major exchange collapse or regulatory crisis. Binance Research notes that this degree of hedging appears disproportionate, suggesting the market may be closer to a sentiment trough than a precipice. Bitcoin's Realized Profit/Loss ratio has fallen below 1.0 for the first time since 2023, typically a hallmark of forced capitulation rather than orderly distribution.

The report also highlights the ongoing divergence between Bitcoin and global M2 money supply, which has now extended beyond any prior episode in the dataset's history. Binance analysts attribute this to three overlapping structural distortions: dollar weakness mechanically inflating the dollar-denominated M2 aggregate without reflecting real liquidity growth; the post-ETF institutional ownership structure now classifying BTC alongside software equities in risk management systems; and elevated real interest rates keeping large liquidity pools parked in money market funds.

13F data from Q4 shows a net institutional outflow of roughly 25,000 Bitcoin-equivalent from ETF holdings. However, the breakdown is asymmetric, with investment advisors and hedge funds accounting for the majority of sales, while governments, holding companies, and private equity were net buyers.