Record-Breaking Options Activity in Bitcoin and Ethereum
The combined notional open interest in Bitcoin and Ether options listed on Deribit has reached an all-time high of $20 billion, according to Deribit. This surge in options activity reflects the growing market sophistication and interest among investors. Swiss-based Laevitas reports that the dollar value locked in active Bitcoin and Ether options contracts on Deribit has risen to $20.64 billion, almost 90% higher than the rate in November 2021. Deribit currently dominates 90% of the global crypto options activity.
Implications of Record Activity
This record-breaking options activity suggests that investors and market makers will have more influence on determining the spot market price. Market makers with a net short gamma exposure in Bitcoin may have bought the cryptocurrency as its value rose to adjust their overall exposure back to neutral, inadvertently accelerating the price rally. The expiration of BTC and ETH options contracts worth $4.5 billion on Deribit is also expected to bring volatility into the crypto markets.
CME Reports All-Time High Open Interest for BTC and ETH Derivatives
The CME Group has reported a significant increase in volumes and open interest for crypto derivatives in Q3 2023. Monday’s trading session set a record for CME Group Bitcoin Futures with 20,000 contracts traded. The third quarter also saw a record average of 15,800 contracts for bitcoin futures and a 22% jump in open interest for Ether futures compared to the second quarter. Ether options contracts also experienced a significant increase of 75%, while open interest rose by 55% on a quarterly basis.
Bitcoin and Ethereum Price Action
Bitcoin has broken through the $30,000 resistance level and is experiencing upward momentum. The price rally, coupled with the Relative Strength Index (RSI) exceeding 70%, suggests that the asset is overbought and may consolidate in the short term. Ethereum has seen a 12.3% price increase and has reentered the ascending triangle, indicating a bullish trend. If momentum continues, ETH has a chance to reach the resistance at $2100, with support currently found at $1665.
Hot Take: Growing Interest in Options Signals Maturing Crypto Market
The surge in options activity in Bitcoin and Ethereum, along with record-breaking open interest, signifies the maturing of the crypto market. Investors and market makers now have more influence on price determination, and options expiration events bring volatility into the market. Additionally, the increase in volumes and open interest for crypto derivatives reported by CME Group further indicates the growing interest in cryptocurrencies among traditional financial institutions. As Bitcoin and Ethereum continue to experience price rallies, it is crucial for investors to monitor market conditions and exercise caution amidst potential consolidation phases.
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