Bitcoin Options Open Interest Soars to Record $20.5B Amid ETF Approval Anticipation
Summary:
Bitcoin's options open interest has reached a historic $20.5 billion, indicating institutional investor involvement. The options market is dominated by Deribit, with a 90% share. The $54,000 call option currently trading at 0.02 BTC demands a 25% Bitcoin value increase in 49 days for profitability. The put options for January are mostly cautious, with 97% betting at $42,000 or below. The potential approval of a Bitcoin ETF could significantly impact these options.
Bitcoin's (BTC) options open interest has made a record breakthrough, hitting a remarkable $20.5 billion on Dec. 7. This enormous growth signals the accelerating engagement of institutional investors in the cryptocurrency realm. Differing from futures, BTC options carry fixed expiration rates, bestowing valuable knowledge about traders' projections and market mood. Leading the pack in the Bitcoin options domain is Deribit, proudly wielding a 90% chunk of the market. The trading platform currently carries a massive $2.05 billion open interest for options concluding on January 26. It should be noted, though, that as the deadline draws near, a significant slice of these contracts could diminish in value. Nevertheless, with an exchange-traded fund (ETF) based on spot trade gaining regulatory acceptance becoming a distinct possibility, bullish predictions previously on hold are reentering the game.
Presently, the $54,000 call option aimed at expiring on Jan. 26 is transacting at 0.02 BTC which roughly equates to $880 at today's rates. For this option to generate a profit, Bitcoin's worth must see a 25% hike in the next 49 days. It's worth highlighting that vendors can cushion their positions using BTC futures alongside snagging the options proceeds, reducing some of the perceived trade hazards.
Market observers underscore the importance of the $250 million open interest arising from the $50,000 call options on Deribit. Valued collectively at $8.8 million, these options could experience a considerable rise should the ETF plan receive regulatory approval. However, the intentions of these options buyers remain a point of speculation.
The modest demand for call options in the $70,000 to $80,000 range - accounting for less than 20% of the open interest - points to a subdued bullish sentiment. The options, with a $285 million exposure, are currently worth a measly $1.2 million. In contrast, options pegged at $60,000 and $65,000 set for expiry on Dec. 29 have an open interest of $250 million.
As for put options for the January 26 expiration, traders seem to have hedged their bets with 97% betting on prices of $42,000 or lower. Unless Bitcoin's prices take a dramatic shift, the $568 million open interest of put options could be staring down an unproductive future. However, selling put options can enable traders to gain positive exposure to Bitcoin above specific values, although gauging the exact effect can be tricky.
The open interest in Jan. 26 call options on Deribit outstrips that of put options by a factor of 2.6 indicating a high demand for neutral-to-bearish strategies. While the $50,000 call options are undoubtedly attractive and have the potential to push Bitcoin's prices upwards, it's paramount to remember the expiry price will be determined strictly at 8:00 UTC on Jan. 26 rendering any significant efforts prior to that premature.
For those betting on a fall in Bitcoin prices, having the ETF proposal rejected would be the ideal outcome. However, the SEC might need more time to come to a decision, particularly with recent amendments to many filings. Analysts with expertise in ETFs at Bloomberg currently project a 90% chance of approval in 2024, a timeline well beyond January.
Considering there are still 49 days left until the January 26 expiration, dismissing the 97% of put options as meaningless might be premature. Additionally, those backing a drop in Bitcoin's price have the regulatory scenario to support their stance, especially given the court battle involving Binance and its founder, Changzeng Zhao, is just starting.
Published At
12/8/2023 1:15:00 AM
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