The options business appears to be the “pharma sector” of the cryptocurrency market, demonstrating solid activity in both bullish and bearish market trends.
Take, for example, the bitcoin listed on Deribit. options market, which continues to boom despite, or perhaps because of, the recent bearish price action. On Thursday, the number of active BTC contracts on the platform rose to a record 453,820, each representing 1 BTC. Notional open interest, which represents the dollar value of active contracts, also stood at a record $50.27 billion, according to data source Deribit Metrics.
“Despite continued price pressure and a recent decline in the BTC spot price, BTC options open interest on Deribit has risen to a new all-time high of approximately $50 billion notional, a record high in both contract and dollar terms, underscoring a sustained and expanding market share,” Luuk Strijers, CEO of Deribit, told CoinDesk.
So far this year, open interest on contract terms has more than doubled, demonstrating resilience as BTC fell from $110K to $75K earlier this year before reaching a new all-time high of over $126K earlier this month. Since then, prices have fallen sharply to $108,000.
The inelasticity to price swings can be explained by the fact that options serve multiple strategic purposes beyond simple directional bets, allowing traders to bet on volatility and timing. This facilitates effective management of market exposure through thick and thin.
A call option gives the holder the right, but not the obligation, to purchase the underlying asset at a predetermined price at a later date. A put option offers the right to sell.
Active Downside Coverage
The latest record in BTC open interest is marked by the growing popularity of put options, which offer protection against downtrends.
This is evident by the $2 billion in notional open interest on the $100,000 strike option, making it almost as popular as the $120,000 and $140,000 strike options. The $100,000 put option represents a bet that the BTC spot price will fall below that level.
“Unlike previous records, this new OI milestone features a notable concentration of open interest around the 100,000 strike, highlighting active short covering by market participants. In this single strike, Deribit displays over 19,000 open contracts, representing over $2 billion in notional value,” Strijers said.
He explained that puts continue to trade at a premium to calls, although the relative wealth of puts has declined in recent days, and some traders are seeking out-of-the-money calls with a higher strike.
“Despite the dominant bearish positioning, the last 24 hours also reveal signs of renewed optimism. While selling OI has increased on key bearish moves, there is notable call activity building around 120K and above, suggesting traders are positioning for potential upside volatility or gamma exposure,” Strijers noted.
