Bitcoin options trading hits unprecedented levels

Bitcoin options trading has reached unprecedented levels, according to Luuk Strijers, chief commercial officer at Deribit. Open interest on the exchange is the same as its 2021 peak, but with prices 50% lower. This doubling suggests investors are bullish about bitcoin, with open calls outweighing puts, while bitcoin’s spot price has risen 69% in 2023 to about $28,020. Investor belief is further supported by bitcoin futures trading in “contango” on the CME exchange, where prices are expected to continue rising. However, the low liquidity of crypto spot markets could lead to sharp price fluctuations. Analysts suggest investors are also bullish about ether, with open call options far outweighing puts. Its spot price has risen 50% to $1,795 in 2023.

The recent surge in options trading in the bitcoin market has been unprecedented, with open interest on the Deribit exchange reaching record levels. As the cryptocurrency continues to perform well, investors are showing increasing interest in the market, as indicated by the number of unsettled contracts. The surge in open interest indicates that there is growing demand for options contracts, with more open calls than puts, and notional open interest reaching a peak of $12.24 billion on March 22.

Bitcoin has experienced a strong upward trend this year, rising by 69% to approximately $28,020, making it one of the best-performing assets of 2023. This bullish outlook is supported by the fact that bitcoin futures on the CME exchange are trading in contango, indicating that investors expect prices to continue to rise. This provides an opportunity to use bitcoin to hedge or as a funding instrument, making options trading more attractive to investors.

However, overall liquidity in the crypto spot markets remains low, which could lead to sharp price swings. Despite its recent drop, Bitcoin’s current volatility is still higher than where it started 2023 at 58, hovering around 66. Ethereum is also seeing strong options trading activity and has risen by 50% this year to $1,795, with investors remaining bullish.

While bitcoin and ether have been treading water for the past two weeks, analysts suggest that breakthroughs in either direction could be interesting. According to Luuk Strijers, Chief Commercial Officer at Deribit, current levels of options activity are unprecedented, indicating a doubling in participation. Deribit now has an average daily trading volume of $7.5 billion, up from $1.5 billion a year ago.