# Cryptoverse: Bitcoin traders like their options
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-05
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Record Spike in Bitcoin Options and Futures Trading Amid
Meta Description: Investors flock to options and futures on Deribit as open interest spikes, indicating bullish sentiment and hedging strategies despite market volatility.
URL: https://financedigest.com/cryptoverse-bitcoin-traders-like-their-optionshtml

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By Medha Singh and Lisa Pauline Mattackal

(Reuters) – Even as bitcoin flies high, investors are keeping their options open, judging by a record race to derivatives.

Open interest for bitcoin options and futures has spiked over the past month as fear has stalked global banking, hitting an all-time high of 433,540 contracts on March 23 on Deribit, a leading exchange for crypto-focused derivatives products.

In the 12 months preceding March, by contrast, open interest ranged between 150,000 and 300,000, referring to the number of contracts yet to be settled between buyers and sellers, which provides a measure of [investor participation in a market](https://www.financedigest.com/thoracic-drainage-devices-market-rising-new-business-opportunities-for-investors.html "Thoracic Drainage Devices Market Rising New Business Opportunities for Investors").

Most [options traders are betting on bitcoin](https://www.financedigest.com/cryptoverse-is-bitcoin-out-of-the-woods-consider-the-options.html "Cryptoverse: Is bitcoin out of the woods? Consider the options") prices jumping higher, with open interest in call options at 206,979 contracts on Deribit, more than double the bearish put options of 93,857.

In notional terms, open interest in bitcoin’s most recent peak at $12.24 billion on [March 22 was the highest since](https://www.financedigest.com/the-nasdaq-100-on-track-to-have-its-best-week-since-march-2010.html "The Nasdaq 100 On Track to Have its Best Week Since March 2010") mid-November when bitcoin was trading near $60,000, according to Deribit data.

We’ve never seen this much activity before,” said Luuk Strijers, [chief commercial officer](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer") at Deribit. We have reached the same levels of [open interest as 2021 at half](https://www.financedigest.com/more-than-half-of-workers-are-open-to-leaving-their-current-employers.html "MORE THAN HALF OF WORKERS ARE OPEN TO LEAVING THEIR CURRENT EMPLOYERS") the prices, which means we have doubled.

Options contracts give their buyers the right, but not an obligation, to buy or [sell an underlying asset at a fixed price](https://www.financedigest.com/3-tricks-to-get-a-better-price-when-selling-your-car.html "3 Tricks To Get a Better Price When Selling Your Car") in the future. Such contracts are not only used as a lower-risk, lower-reward alternative to actually buying bitcoin, but also as a way to hedge other bets, making it a better gauge of investor participation than an indicator of [price expectations](https://www.financedigest.com/ecb-survey-shows-rising-inflation-expectations-despite-energy-price-falls.html "ECB survey shows rising inflation expectations despite energy price falls").

![Crypto options shine](https://www.globalbankingandfinance.com/wp-content/uploads/2023/04/chart.jpg)

RELATIVE [VALUE TRADES](https://www.financedigest.com/doing-more-with-trade-data-the-value-of-deeper-analytical-insights.html "Doing More with Trade Data: The Value of Deeper Analytical Insights")

Nonetheless, [investors may have good reason](https://www.financedigest.com/despite-the-headwinds-investors-have-important-reasons-to-be-cheerful.html "DESPITE THE HEADWINDS, INVESTORS HAVE IMPORTANT REASONS TO BE CHEERFUL") to be bullish about the spot price of bitcoin, which has risen 69% in 2023 to about $28,020 making it one of the best-performing assets of the year.

Furthermore, bitcoin futures on the CME exchange are trading in “contango”, meaning future contract [prices are trading higher](https://www.financedigest.com/vhs-tapes-selling-for-46000-higher-than-original-price.html "VHS tapes selling for 46,000% higher than original price") than earlier ones, indicating investors expect prices to keep going up. Futures for April trade at $28,475 while the May contract trades at $28,645, [data from the exchange](https://www.financedigest.com/exclusive-binance-moved-346-million-for-seized-crypto-exchange-bitzlato-data-show.html "Exclusive-Binance moved 6 million for seized crypto exchange Bitzlato, data show") showed.

This has set up the market for some interesting relative value trades where bitcoin can now be used as a [funding or hedging](https://www.financedigest.com/what-is-a-hedge-fund.html "What Is A Hedge Fund") instrument,” analysts at crypto investment firm Matrixport said.

Leo Mizuhara, CEO of digital [assets management](https://www.financedigest.com/britains-post-brexit-asset-management-revamp-eyes-liquidity-tokenisation.html "Britain’s post-Brexit asset management revamp eyes liquidity, tokenisation") platform Hashnote, said the macro environment for bitcoin and other digital assets was turning more favorable given the Federal Reserve’s large liquidity injections to shore up the banking sector.

While the recent Fed actions could trickle through to crypto, overall liquidity in crypto spot markets still remains low, which could [lead to sharp swings in prices](https://www.financedigest.com/liverpool-shines-as-one-of-uks-leading-ladies-for-house-price-growth.html "Liverpool shines as one of UK’s leading ladies for house price growth"), market participants cautioned.

Bitcoin volatility is hovering around 66, below a peak of 96 hit during March’s [banking turmoil](https://www.financedigest.com/banking-turmoil-will-not-have-knock-on-effect-on-commodities-trafigura-cfo.html "Banking turmoil will not have knock-on effect on commodities -Trafigura CFO") but still higher than where it started 2023 at 58, according to data from CryptoCompare.

ETHER BREAKTHROUGH?

After an estimated $4 billion of bitcoin options expired at the [end of first quarter on March](https://www.financedigest.com/tennis-panic-attack-ends-tsurenkos-indian-wells-as-raducanu-marches-on.html "Tennis-Panic attack ends Tsurenko’s Indian wells, as Raducanu marches on") 31, open interest had eased to $8.7 billion on Monday – still at levels not seen in the two years before March.

[Investors are still also](https://www.financedigest.com/old-trafford-attracting-not-just-footballers-from-around-the-world-but-also-investors.html "Old Trafford attracting not just footballers from around the world, but also investors") bullish on ether, judging by options trading. [Open interest in ether on Deribit features 1.7 million call options](https://www.financedigest.com/nexi-open-to-options-as-banco-bpm-seeks-partner.html "Nexi open to options as Banco BPM seeks partner") versus 656,158 puts.

The spot price of ether has jumped 50% to $1,795 this year, while the [Ethereum blockchain is preparing for another significant upgrade](https://www.financedigest.com/cryptoverse-ethereum-upgrade-to-unlock-33-billion.html "Cryptoverse: Ethereum upgrade to unlock billion") to the blockchain later in April, known as the Shanghai upgrade.

For the past two weeks, though, both ether and its big brother bitcoin have been eerily treading water, leaving investors to place bets on [boom or bust](https://www.financedigest.com/the-road-to-transformation-raconteur-ceos-journey-from-near-bust-to-boom.html "The Road To Transformation: Raconteur CEO’s journey from near bust to boom").

Bitcoin has ranged between $26,500 and $29,000 and ether between $1,700 and $1,850,” said Aakash Desai, an [options trader](https://www.financedigest.com/analysis-u-s-retail-traders-pile-back-into-options-as-meme-stock-mania-flares.html "Analysis-U.S. retail traders pile back into options as meme-stock mania flares") at crypto liquidity provider B2C2.

“Breakthroughs in either direction could be interesting.”

(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)


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