The outlook for bitcoin's near-term rally is unclear, with CME options data showing that institutions remain skeptical

The outlook for Bitcoin's near-term rally remains uncertain, with bitcoin options data from the Chicago Mercantile Exchange (CME) showing that investors are still willing to pay a premium for short-term protective puts. Although the positive US inflation data released at the beginning of this week restored the institutional bullish outlook for Bitcoin in the long term, it still did not ease the market's concerns about the recent price correction.

CF Benchmarks noted that after the release of Wednesday's U.S. Consumer Price Index (CPI) data, the implied volatility of short-term imaginary puts was higher than the implied volatility of imaginary calls. These options are based on CME's cash settlement standard Bitcoin futures contracts, each of which is 5 BTC in size.

Volatility skewness is the difference between the implied volatility of a fictitious put and a call. The gap is particularly pronounced in short-term options. Higher implied volatility demand for imaginary puts suggests that investors remain cautious about near-term downside risks and are willing to pay a premium for protective puts. A put is a derivative contract that protects the buyer from a fall in price, with the seller taking a bearish position on the market, hoping to profit from a potential fall in price or hedge against risk. A call right, on the other hand, provides insurance against price increases.

Implied volatility is an estimate of the future volatility of the underlying asset based on the option price. As the demand for options increases, so does implied volatility. CF Benchmarks is a UK-regulated digital asset benchmark provider that offers benchmarks such as the CF Bitcoin Volatility Index, and publishes several cryptocurrency reference rates alongside the CME, including the CME CF Bitcoin Reference Rate and the CME CF-Ethereum USD Reference Rate.

The volatility surface of Bitcoin Options is a three-dimensional plot that shows the implied volatility of Bitcoin options with different maturities and different Delta values. The Delta value of the virtual option ranges from 0.5 to 0. As you can see from the chart, after the release of the CPI data, there was an increase in the preference for the 20 - to 40-day expirations of imaginary puts. At the same time, as the expiration dates of options lengthen, volatility skew gradually favors call or bullish bets. This indicates that investors are becoming more optimistic about the long-term prospects of Bitcoin and are willing to pay more to buy imaginary calls in the hope of potential upside gains.

The chart also shows that the implied volatility of longer-term options is relatively flat, which may reflect increased institutional engagement as these investors typically have a more nuanced view of the market and are less susceptible to extreme sentiment swings. A similar long-term bullish trend has also been seen in options trading on the cryptocurrency exchange Deribit. Deribit accounts for more than 85% of global cryptocurrency options trading volume. As of now, the notional value of open bitcoin option contracts on the platform (in US dollar terms) is $15.63 billion, while the value of open bitcoin option contracts on the CME is $417 million.

These data show that the market has become more confident about the long-term prospects of Bitcoin, but remains concerned about the risk of short-term price volatility. Bitcoin is currently trading at $65,550, up 6.6 percent for the week, according to CoinDesk. Overall, despite recent price volatility, investors remain optimistic about Bitcoin's long-term potential.