Bitcoin options market signaling “smart money is still paying up for downside protection rather than chasing the pump”

Bitcoin is about to close its fifth consecutive month in the red, down 16.3% for the month — its worst February since 2020, according to CoinGlass, and a far cry from the average 11% February return. On Friday morning, Bitcoin was around $65,800. Going into March, which has a 12.2% historical average increase, the overall sentiment remains bearish.

The options market is also guarded, or, as Jean-David Péquignot, chief commercial officer at Deribit, told Sherwood News, it remains “notably unimpressed.”

Péquignot said that the February 27 monthly expiry looms large, representing roughly 24% of the total BTC options open interest (116,000 of 489,000 contracts) at Deribit.

“While spot price climbed, the 25-delta risk reversal remained stubborn. 30-day puts are still trading at a ~7% volatility premium over calls, signaling that smart money is still paying up for downside protection rather than chasing the pump,” he said.

Péquignot said that across all expirations, the $60,000 put represents the single largest open interest (OI) concentration on the board, dwarfing all other strikes, “acting as a kind of gravitational well.”

“OI has built significantly in the $50K–$60K put range, showing fresh demand for protection. If BTC were to break through $63K and approach $61K, the negative gamma effects from this OI cluster would likely accelerate the move, turning a pullback into a high-velocity liquidity sweep,” he said, adding that ETF holders and corporate treasuries are buying six-month and one-year puts at $60,000 or below as portfolio insurance.

“For these players, $60K could be the maximum pain threshold — the level below which their investment mandate or macro thesis begins to break down,” Péquignot said.

Looking ahead, Péquignot said that lacking sufficient momentum to go higher, the market still seems to take the path of least resistance down into the pockets of stop-losses at $62,000 to $65,000 to find the liquidity needed to fuel a move resolutely higher.

“And losing the more critical psychological level at $60K would open the door to the $55K–$50K region,” he said.

A convincing daily close above $68,000 would go a long way toward neutralizing the prevailing bearish sentiment and shift attention toward the $70,000 to $71,000 resistance band, he added.

Several experts are looking at March with skepticism, as macro drivers and geopolitical flare-ups continue to weigh on bitcoin.

Nic Puckrin, cofounder of Coin Bureau, told Sherwood that it’s a 50-50 toss-up whether bitcoin will rebound from current levels or move lower.

He said that in the short term, the direction of travel will depend on the macro backdrop and news flow. Catalysts include a compromise finally reached on the CLARITY Act on March 1, while risks include escalating geopolitical tensions, he said.

“Realistically, we could be stuck in the range between $60,000 and around $71,000 for some time. Even if there is a relief rally in March, this momentum is unlikely to last,” Puckrin said.

Matt Hougan, CIO of Bitwise, told Sherwood that crypto has never staged a V-shaped recovery after a crypto winter; instead, it’s usually a “tortured process of bottoming slowly.” 

“That’s my base case here: that we chop sideways, maybe even testing the previous lows, and that the real recovery takes place in Q2 or Q3 dependent on news flow,” he said.

“In the depths of the winter, crypto was so depressed that it didn’t care about anything; not even very good news,” Hougan said. “When BlackRock announced it was investing in UNI tokens a little while ago, the market barely shrugged. If you can’t get excited that the world’s largest asset manager is endorsing the world’s largest DeFi protocol, you know things are bad.”

Hougan said that now the deep freeze has broken, and that “if we get the right series of news flow lining up, there’s a chance that we rally.”

Finally, Mike Marshall, head of research at Amberdata, predicts March will look a lot like February, as the macro environment is hostile.

What makes this interesting, rather than simply bearish, is the accumulation happening underneath: leverage is washed out, stablecoins are minting $4.3 billion per month, and whales have been quietly adding more than 230,000 BTC, Marshall said.

“The correction has done its job, cleaning out excess. Think we need a catalyst, and the calendar (CLARITY Act deadline, Fed chair nomination, tariff resolution) could deliver one, just probably not on a predictable timeline,” he said.