High Interest in Bitcoin in Options Market
A record-high worth of Bitcoin options ($3.7 billion) is due to expire on January 29, as speculation over the digital coin’s future price movements increases. A previous record high of about $2.4 billion was registered on December 25.
The most recent surge in volatility and higher interest in its derivatives are attracting high in the Bitcoin and crypto market, in general.
As of yesterday, Bitcoin options were worth about 245,700 bitcoins, or around $9.1 billion. BTC options refer to contracts that allow investors to sell the cryptocurrency at a specific price over a particular period of time. In other words, investors try to anticipate and bet on whether the cryptocurrency will move up or down without having to actually trade it.
Interest in BTC options has been on the rise lately as cryptocurrency has been on a frenzy over the last year, hitting an all-time high of almost $42,000 earlier this month. The top cryptocurrency in the world by market cap has surged over 300% in 2020 and more than 60% in the last month.
Data from the options market shows that speculators are feeling optimistic about Bitcoin’s prospects. Since Monday, speculators’ interest in "calls" (bets that Bitcoin will move higher) was significantly larger compared to the open interest in "puts" (bets that the price will drop).
"It reflects just how volatile [Bitcoin] has become, even by its own standards, over the last couple of months," said Craig Erlam, market analyst Oanda.
"The moves we're seeing on a daily basis now are incredible so it's natural that options are being more utilized."
According to analysts, unprecedented stimulus from central banks amid COVID-19 as well as concerns about inflation and currency devaluation were the main factors fueling Bitcoin’s massive rally.
Options have become one of the preferred ways of speculating on BTC among investors, boosted by some of the renowned institutions entering the market recently, including the CME Group.
Bitcoin options contracts, which are currently worth a record $3.7 billion, are set to expire at the end of January. Interest in the options market has grown significantly in recent months, boosted by Bitcoin’s huge rally that has resulted in a fresh all-time high near $42,000.
About the Author
Avi Ben Ezra is the Chief Technology Officer (CTO) and Cofounder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.