Bitcoin extended weekend losses on Monday, triggering one of the largest liquidation events this year. Options traders are now positioning with a bearish skew in anticipation for a continuation of the downtrend.

The top crypto fell less than 4% on Monday, but the resulting liquidation cascade was the biggest this year, wiping out roughly $1.65 billion in longs and $145 million in shorts.

Despite the scale of the recent fallout, implied volatility, which tracks the future expectations of options traders, showed little change and remains muted, Adam Chu, chief researcher at GreeksLive, told Decrypt. 

There was, however, a significant uptick in put-buying activity among options traders after the crash, according to experts who spoke to Decrypt, which hints that markets are pricing in a continuation of the recent drop.

There’s a “heightened demand for puts” among options traders, “as fears of continued downward price action worry the market,” Sean Dawson, head of research at on-chain options platform Derive, told Decrypt.

Max Shannon, senior associate at Bitwise Europe, told Decrypt that the “market is pricing in short-to-medium-term downside,” driven primarily by the consistent uptrend in  1-week and 1-month put-call delta skew to its highest level since early August.

A put-call delta skew measures the difference in implied volatility between out-of-the-money puts and calls with the same expiration date. An uptick in this metric indicates an increase in put-buying activity among investors for downside protection.

Shannon speculates that this bearish flow could be because of the “sell-the-news” expectations weighing down on crypto markets after the highly anticipated Federal Reserve’s quarter-point rate cut on September 17.

The S&P 500 index and gold, meanwhile, have returned 3.68% and 12.41% since Fed Chair Jerome Powell’s dovish Jackson Hole comments on August 22. In contrast, Bitcoin and Ethereum show negative 1% and 3% returns in the same period, per TradingView data.

Despite the crypto-specific selling pressure, muted implied volatility, and put-buying, Chu said the market remains “optimistic about the fourth quarter” and that bullish positioning began as early as last month.

Dawson echoed Chu’s outlook, adding that “prices will trend inevitably upwards” over the next three to six months, based on options traders’ positioning and bullish strikes. 

He expects a sharper recovery for Ethereum relative to Bitcoin as market makers are net short gamma, which could force these investors to purchase spot Ethereum if the price moves against their downside positions.