This Ratio Creates Bitcoin Price Upside

A major thing that anyone who follows Bitcoin notices is how market sentiment can shift seemingly in moments. We’re one Elon Musk tweet away from a bear market, one Tesla earnings report away from a huge bull market. It is about as emotional of a market as you will ever find. The question is: What are metrics that we can use to quantify where we are on this emotional spectrum?


One thing that I like to keep an eye on is the ratio of how the calls and puts are trading in a specific month, let’s call it the “yield and volatility ratio.” Basically, it considers the distance like-priced calls and puts are from the current price of spot bitcoin and divides the difference in price between the calls and the spot bitcoin price by the price between the puts and the spot bitcoin price. How high or low this metric goes is determined by many things, but primarily by the implied volatility of the options skew and the futures yield curve — giving the metric its name. This ratio can give a very good idea of how the market is currently forecasting the price of bitcoin. What’s the sentiment? Is bitcoin about to moon? Or is the run over, and we should prepare for a three-year bear run?

It’s best to illustrate this by using some examples from the past few months. On May 11, 2021, with the bitcoin spot price at $55,000, let’s look at what the ratio was for the September 24, 2021, expiration on Deribit:

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