Exploring the Reasons Behind the Bitcoin Options Rally

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• The total value of active open positions or the locked-in US dollars in active Bitcoin option contracts has reached a record level of $15 billion.
• Deribit, the world’s leading cryptocurrency options exchange, represents nearly 87% of the global cryptocurrency options open interest (25 billion dollars).
• There are several reasons for this rally, including optimism about the soon-to-be-approved ETF and macroeconomic developments.

Recently, the increased interest in Bitcoin options has led to a new record in open positions: Option data!

Bitcoin Options Reach a New Record

Trading in Bitcoin (BTC) options listed on the Deribit crypto exchange has become more popular than ever. The total value of active open positions or the locked-in US dollars in active Bitcoin option contracts has reached a record level of $15 billion. This figure is nearly double since the end of September and surpasses the peak of $14.36 billion recorded during the bullish market days of October 2021. At that time, BTC was trading above $60,000; today, it is around $37,200.

As of the time of writing, the value of open positions in options had declined to $13.8 billion. Contract-wise, open positions reached 376,000 BTC, nearly doubling from October 2021 but significantly below the record of 433,540 BTC in March of this year. One option contract on Deribit represents one Bitcoin.

In a statement, Chief Commercial Officer Luuk Strijers said, “We are excited to announce that we have reached an all-time high (ATH) of $15 billion in conceptual open positions in BTC options,” adding, “This development underscores the increasing preference for options as a strategic tool among investors for positioning, hedging, or taking advantage of recent increases in implied volatility.”

Deribit, the world’s leading cryptocurrency options exchange, represents nearly 87% of the global cryptocurrency options open interest (25 billion dollars). Options are financial contracts representing the right to buy or sell an asset, in this case, Bitcoin, at an agreed-upon price for a specified period. Buying a call option gives the right to buy, while selling a put option gives the right to sell.

Recently, the BTC options market surpassed the BTC futures market, indicating growing market sophistication. Bitcoin rallied from $25,000 to $38,000 since early October. There are several reasons for this rally, including optimism about the soon-to-be-approved ETF and macroeconomic developments. Positive price movement forced traders to take bullish positions through buying call options.

Bitcoin and Ethereum Options Flow Strengthening

Over-the-counter institutional cryptocurrency trading network Paradigm stated in a message, “While the options flow remains quite buoyant due to significant outright purchases in both BTC and ETH, buy spreads are increasing further in BTC.”

In 2019, Deribit collaborated with Paradigm to launch a block trading tool. Block trades are large transactions privately negotiated in futures and options or a combination of both.

According to Amberdata, large block trades were executed last week for December expiration call options at $40,000 and January expiration call options at $50,000. A trader sold a straddle for a premium of $2.8 million. Selling volatility strategies were quite popular during the summer when BTC and ETH were stagnant.

The open position in Ethereum options has significantly increased, reaching $6.83 billion. However, it nearly reached $8 billion in September 2022, which was the peak when Ethereum completed the transition to the proof-of-stake consensus mechanism.