Options Traders Buy About $590 Million in Bitcoin Puts to Hedge After Binance Incident
Key Facts
Bitcoin traders accelerated purchases of put options to hedge against a price decline after the Binance incident, in activity that included about $590 million in notional options blocks on Paradigm over 8 hours. CoinDesk said that volume was equivalent to nearly half of all Bitcoin options block trading on Deribit over the same period. Put options give buyers the right to sell Bitcoin at a predetermined price, so the trades provided protection against a near-term decline. Binance estimated the incident’s total impact at about $6.3 billion and said it had frozen about $3 billion in affected on-chain assets. Options data showed tangible demand for protection, though that alone did not signal expectations that volatility would persist.
The first large put-option trade on Paradigm began at 20:38 UTC on Oct. 29, about 15 minutes after the first outflows from a Binance wallet and before the news was announced publicly. The trade involved the purchase of 250 contracts with a strike price of $78,000 and an Oct. 31 expiration, with a notional value of about $20 million. Three minutes later, another trade of the same size was executed in the same contract, but the buyer paid a price about 35% higher. These trades show early timing for hedging activity, while the data do not identify the buyers. Nor do they prove that traders were betting on a sharp price collapse.
Trade flow was clearly tilted to the downside, with two trades standing out during the busiest hours, each involving a block of 1,000 Bitcoin, in put options with a $74,000 strike price and a mid-November expiration. The two trades had a combined notional value of about $155 million. A Paradigm official said buying was concentrated at strike prices between $74,000 and $78,000, levels close to the spot price. The official added that most contracts expired either that week or in mid-November. CoinDesk described the positioning as a hedge against a near-term decline, rather than a bet on a deep collapse.
Deribit also recorded an increase in put-option activity, with the largest cited bets being a multi-leg strategy across November and December expirations worth about $190 million. One-week Bitcoin options skew rose to 18% at its peak during Asian trading hours on Friday, Oct. 30, signaling a faster pace of demand for downside protection. But the increase was short-lived, and skew remained positive across all maturities. The incident also drove price moves in the market; the Associated Press reported that Bitcoin fell 3.2% on Thursday evening to below $79,000. Reuters said in a report on Friday that the currency had hit a 6-week low and was down 3% at $76,469.82 at the time of publication.
In its initial explanation of the incident, Binance said it may have been linked to a compromised laptop belonging to a DevOps engineer, which allowed the attacker to access a service container and send unauthorized withdrawal transactions. It added that it had found no evidence of private wallet keys being exposed. TRM estimated, according to the Associated Press, that an attacker moved about $6.36 billion from Binance wallets across 10 blockchain networks, most of it within about 20 minutes. TRM said the North Korea-linked TraderTraitor unit was likely behind the attack. Binance put the incident’s impact at about $6.3 billion and said it had worked with blockchain partners to freeze about $3 billion in affected assets as of its update on Oct. 30.
Other companies announced freezes of assets linked to the incident. Tether said it froze more than $1.5 billion on Thursday, Oct. 29, while Circle said it froze more than $800 million in coordination with law enforcement. Binance said it would cover all losses from its SAFU fund and company funds, adding that user funds were safe. The Associated Press reported on Friday that deposits were unaffected, while withdrawals remained suspended, with a resumption expected within a day or two. Tim Sun, senior researcher at HashKey Group, said any disruption to deposits and withdrawals could limit market makers’ ability to move capital between platforms. He added that this could affect liquidity beyond the direct losses.
In extended U.S. trading on Oct. 30, Coinbase shares fell 4.8%, while shares of Strategy, known for buying Bitcoin, dropped about 6%, Reuters reported. Reuters also reported that BNB fell more than 8% over 24 hours to $694, while Ether fell to a two-month low of $2,238.76. An analyst at Bitbank said concern was not limited to the size of the loss, but also included the possibility of declining confidence in centralized platforms and the potential for further withdrawals, liquidity disruption and forced selling. The analyst said the impact could be short-lived if Binance proved customer assets were safe and quickly restored services. The platform said it would publish an update on its reserves after the remediation was complete.