BTC and ETH are seeing a drop after recent gains. At the time of writing, BTC is down 2% and ETH is down over 3%. This follows a longer upward trend in the past weeks, signaling a change in market behavior. In higher timeframes, BTC is trading below its 50-day moving average. The next important support level for BTC is $112,000, which is the low from August 2 and the high from May 22. This drop is partly due to profit-taking by those who entered the market at its peak. Bitcoin and Ethereum giving back their recent gains shows a shift in momentum. BTC falling below its 50-day moving average signals a pause in the strong uptrend. For those trading derivatives, it’s time to focus on risk management and consider more neutral or defensive positions. With profit-taking expected, buying protective put options can be a smart way to safeguard current long positions. Recent data shows Bitcoin’s put-to-call ratio has risen to 0.75, its highest in over a month, indicating a greater demand for downside protection. This tactic helps secure some profits from the recent rise if the pullback reaches the $112K support level. We have also observed a significant rise in implied volatility. The 30-day at-the-money volatility for ETH options increased from 50% to 65% in just a few days. Traders expecting a big price swing but unsure of the direction might look at long straddle or strangle strategies. These strategies benefit from substantial movements in either direction, whether this is a minor dip or a bigger trend reversal. For those who see this as a healthy pause before another rise, selling cash-secured puts around the key $112K support for BTC can be appealing. This lets traders earn a premium while setting a price they’re comfortable buying the asset at, showing confidence in the long-term bullish trend despite current weaknesses. This scenario reminds us of market activity in the summer of 2021, where a strong rally followed by a sharp pullback occurred before the market surged to new all-time highs. This historical pattern indicates that while caution is needed in the coming weeks, this might be a consolidation phase rather than the cycle’s end. We are closely monitoring open interest figures, which have only slightly decreased, suggesting that major positions remain intact.

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