Implied volatility tells you how much movement the market is pricing. Skew tells you which direction of movement it is paying up to protect against. It is one of the cleanest sentiment reads options give you, and crypto's skew behaves differently from traditional markets.
What skew measures
For options equidistant from current price, compare the implied volatility of the put against the call. If puts carry higher IV, downside protection is in demand — put skew. If calls carry higher IV, the market is paying up for upside — call skew.
Skew is usually quoted as a single number, such as 25-delta skew: the IV difference between the 25-delta put and the 25-delta call. Positive or negative tells you which tail is bid.
Crypto vs equities
This is where crypto diverges. Equity indices carry a near-permanent put skew — institutions constantly buy downside protection, so puts are structurally expensive. The "volatility smile" leans toward crash insurance.
Crypto, in bull phases, often shows call skew: traders chase upside, paying up for calls in case of a melt-up. That inverts the equity intuition. A crypto desk reading skew has to know which regime it is in, because the resting state is not the same as in stocks.
Reading shifts, not levels
The signal is in the change. A sharp move from call skew toward put skew while spot is still rising is a meaningful hedging tell: someone is paying for downside even as price climbs, which often precedes or accompanies a top. The reverse — put skew collapsing as fear drains — can mark capitulation giving way to recovery.
Term matters too. Short-dated skew reacts to immediate positioning and event risk; longer-dated skew reflects structural views. A steep front-end put skew into a known catalyst is the market bracing for a specific event.
Using it
Skew is context, not a trigger. Combine it with IV level and term structure: rich IV plus steepening put skew is the market paying broadly for downside; cheap IV with flat skew is complacency. Either can frame a structure — buying cheap protection when skew is flat, or fading panic when downside is over-bid.
Takeaway
Skew is the IV gap between puts and calls — which tail the market pays up for. Crypto often rests in call skew during bull runs, the opposite of equities' permanent put bid. Watch shifts, not absolute levels: put skew steepening into a rally is a hedging tell worth more than the spot tape.