Bitcoin Options Market Hits Extreme Defensive Positioning Amid Divergence Between Crypto and Global Economy

The Bitcoin options market has reached its most extreme defensive positioning since the FTX collapse in November 2022, according to Binance Research's weekly report. Despite no comparable fundamental crisis existing in crypto markets or the broader economy, investors are hedging heavily.

The BTC options 25-delta skew index, which measures the relative cost of downside put protection versus upside calls, has hit its most negative reading since November 2022. Binance Research notes that this degree of hedging appears disproportionate, suggesting the market may be closer to a sentiment trough than a precipice.

The divergence between Bitcoin and rising global M2 money supply has now extended beyond any prior episode in the dataset's history, according to Binance analysts. They attribute this gap 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.

Q4 13F filings show a net institutional outflow of roughly 25,000 Bitcoin-equivalent from ETF holdings. However, this outflow was driven by investment advisors and hedge funds selling, while governments, holding companies, and private equity were net buyers.