Bitcoin traders betting the price will drop below $40,000 by next month after Elon Musk's tweet-storm
- Bitcoin traders are increasingly betting the price will fall below $40,000 by June.
- Elon Musk's move to halt Tesla payments in bitcoin has caused the cryptocurrency to tumble.
- One crypto exchange boss said he had seen little sign of people buying the dip this time around.
- For more stories visit Business Insider.
Bitcoin options traders have piled into bets that the world's biggest cryptocurrency will fall below $40,000 by next month following an Elon Musk tweet-storm that sent the price tumbling to around $45,000 on Tuesday.
One exchange chief executive said there was little sign of a "buy-the-dip" mentality among bitcoin traders and investors appeared to be a lot more pessimistic this time around than after previous price falls.
There was a spike in activity on bitcoin derivatives markets on Monday, with the majority of flows going into bearish options, according to figures from data provider Skew.
Around $3.5 billion worth of options contracts changed hands after Musk suggested Tesla might sell its bitcoin holdings, compared to under $1.5 billion of trading volume on Friday. Musk's tweets sent bitcoin tumbling as low as $42,100 before it rebounded somewhat, well off April's record high of close to $65,000.
Data showed high trading volumes for put options with a strike price of $40,000 - effectively bets that the bitcoin price will fall below that level. A put option gives the buyer the right, but not the obligation, to sell an asset at a specified price within a set time period.
There was more than $130 million worth of open interest in $40,000 put options with a June 25 expiry date on Tuesday, according to bybt.com. That suggested a considerable number of options traders were betting the price would fall sharply by then.
"Yesterday we saw a lot of volume in the $40,000 puts," Pankaj Balani, chief executive of crypto derivatives exchange Delta, told Insider.
Balani also said investors were reducing the level at which they were buying call options - effectively bets that the price will rise - suggesting pessimism about the outlook for bitcoin.
"In the previous dips, we had seen that the sentiment had not changed as much. This time around, we are seeing change of sentiment. We're not seeing any signs of bottom-fishing," he said.
"Consensus seems to be that it's fallen quite sharply and it can fall a little more. So $35,000 to $38,000 is the zone where most traders are looking at."
Options traders who had sold puts at around $40,000 - effectively taking the position that the price would not fall below that level - were now buying puts to cover their positions, Balani said.
The crypto exchange boss said action in the options market suggested bitcoin will remain range-bound between $35,000 and $50,000 until June.
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