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Bitcoin and Ether options activity soars to historic highs of $20B amid ETF hype

  • The combined notional open interest in Bitcoin and Ether options listed on Deribit has topped $20 billion.

  • Escalating interest in options points to market sophistication.

  • Later Friday, Deribit will settle monthly bitcoin and ether options worth several billion dollars.

The crypto options market is booming.

The notional open interest of the dollar value locked in active bitcoin and ether options contracts on leading exchange Deribit has risen to $20.64 billion, according to data tracked by Swiss-based Laevitas.

The tally nearly parallels the peak registered on Nov. 9, 2021, when bitcoin traded above $66,000 or 90% higher than the going market rate of $34,170. In other words, the current open interest in contract terms is significantly higher than in November 2021.

"The milestone has been achieved with nearly double the number of outstanding contracts, representing not just a substantial triumph for Deribit, but also a clear indicator of the broader market growth and the escalating interest in options among our clients," Luuk Strijers, chief commercial officer at Deribit, told CoinDesk. Deribit controls 90% of the global crypto options activity.

Options are derivative contracts that give the purchaser the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy and a put offers the right to sell. A call buyer is implicitly bullish on the market, while a put buyer is bearish.

The record activity means flows in the options market tied to investors and market makers will have more say in determining the spot market price.

Market makers were recently said to hold a net short gamma exposure in bitcoin. They may have bought the top cryptocurrency as it rose to adjust their overall exposure back to neutral, inadvertently accelerating the price rally. BTC has gained 30% in two weeks to trade above $34,000.

Later today at 08:00 UTC, BTC and ETH options contracts worth $4.5 billion will expire on Deribit. Monthly and quarterly settlements are known to inject volatility into the crypto market.

Chart

Most open interest is concentrated in calls at strikes lower than bitcoin's current market price. (Deribit) (Deribit)

Most open interest in bitcoin is concentrated in ITM calls or the ones at strikes below BTC's going market rate. Traders snapped up calls over the past two weeks as bitcoin rose from $27,000 to $35,000.

A call option is in the money (ITM) when the underlying security's current market price is higher than the call option's strike price. A put is said to be ITM when the underlying asset's price is lower than the put's strike price.

"Options worth $4.5 billion will expire on Friday. That's a particularly high value of which an uncommon percentage is set to expire in the money (ITM) due to the recent market move potentially prompting some market action," Strijers said.

Author

CoinDesk Analysis Team

CoinDesk is the media platform for the next generation of investors exploring how cryptocurrencies and digital assets are contributing to the evolution of the global financial system.

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