The value of Bitcoin and Ethereum options on Deribit reached a record level of 23 billion dollars. The growing interest in three-dimensional options trading shows that sophisticated traders are flocking to the cryptocurrency market.
This cryptocurrency options trading is hotter than ever!
As of Friday, the cumulative dollar value locked in the number of open or outstanding BTC and ETH option contracts, also known as nominal open interest, was the highest ever at $23.6 billion, said Luuk Strijers, Deribit’s Chief Commercial Officer. Leading cryptocurrency Bitcoin options account for 67% of the total. Ethereum contributes to the rest. On Deribit, one option contract represents one BTC and one ETH. Strijers made the following statement:
Deribit options nominal open interest reached a new ATH with $16 billion in BTC options and $7.6 billion in ETH options. Thus, the total amount was 23.6 billion dollars. Adding $2.2 billion in perpetual and forward OI, Deribit reached the $25 billion milestone for the first time ($25.8 billion total!)
Why cryptocurrency options trading?
Options allow investors to place leveraged bets on the underlying asset. Additionally, it allows hedging from spot/futures market risk. A call option gives the right, but not the obligation, to purchase the underlying asset at a predetermined price at a later date. A put option gives the right to sell.
Options trading is three-dimensional. It allows traders to bet on the direction of price movement, the degree of expected price volatility, and time. Spot and futures markets are one-dimensional and focus only on the price direction. Therefore, record open option interest represents an influx of sophisticated investors into the cryptocurrency market. It also promises better price discovery.
What does it mean for Bitcoin and Ethereum?
At the time of writing, most of the open interest in these 2 cryptocurrency options was concentrated in call options. In the case of Bitcoin, there is a large concentration of open interest in ‘call’ options at the $50,000, $40,000 and $45,000 levels. In Ether, $2,300, $2,400, $2,500 and $3,000 ‘calls’ are the most popular.
The trend towards ‘calls’ is consistent with the ongoing rally in both cryptocurrencies. It also shows that upward expectations continue. Bitcoin surpassed the $44,000 level earlier this week as ETF optimism and U.S. Treasury yields retreated. Thus, as you follow on Kriptokoin.com, it reached the highest level since April 2022. The leading cryptocurrency has gained over 150% this year. Ether approached $2,400 earlier today, its highest level since May 2022. Thus, the leading altcoin increased its year-to-date gain to 98%.
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