Bitcoin Options Market Hits Three-Year Extreme as Governments Buy In

Bitcoin's (BTC) options market has reached its most defensive positioning since the FTX collapse in November 2022, despite no significant fundamental crisis in crypto markets or the economy. According to Binance Research's weekly report, this extreme hedging suggests the market may be closer to a sentiment trough than a precipice.

The BTC options 25-delta skew index has hit its most negative reading since November 2022, with no major exchange collapse, regulatory crisis, or systemic failure. This degree of hedging appears disproportionate, and 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 notes that Bitcoin and global M2 have diverged 23 times since 2015, historically resolving within one to two months on average. However, the current divergence has extended far beyond that window due to three compounding 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. Investment advisors and hedge funds accounted for the majority of sales, while governments, holding companies, and private equity were net buyers.