Bitcoin ‘Options Smile’ Shows Market Fearful of Downside Despite Tesla News

Bitcoin ‘Options Smile’ Shows Market Fearful of Downside Despite Tesla News

Bitcoin has put in a positive performance in the past 24 hours on comments by Tesla CEO Elon Musk that the electric car maker would accept crypto transactions on the condition of reasonable clean energy use by miners.

Still, the move to 2.5-week highs above $39,000 has failed to calm market fears. That's evident from a chart pattern known as the “options smile,” which shows relatively higher implied volatility or demand for options at strikes below bitcoin's current market price than the implied volatility for higher strikes options.

The unique structure speaks of extreme fears and continued demand for downside hedges, as tweeted by trader and analyst Alex Kruger. In plain English, investors continue to buy puts in anticipation of a more profound price decline.