The options business appears to be the “pharma sector” of the crypto market, displaying strong activity in both bullish and bearish market trends.
Take Deribit-listed Bitcoin, for example. The options market, which continues to be bullish 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, representing the dollar value of active contracts, also hit a record $50.27 billion, according to data source Deribit Metrics.
“Despite pricing pressure and the recent decline in the spot price of BTC, BTC options open interest on Deribit reached a new all-time high of nearly $50 billion – a record in both contract count and dollar terms – underscoring continued and expanded market participation,” Deribit CEO Luke Striggers told CoinDesk.
Year-to-date, open interest in contract terms has more than doubled, demonstrating resilience as BTC fell from $110K to $75K before rising to a new lifetime high above $126K earlier this month. Since then, the price has fallen sharply to $108,000.
The volatility of price fluctuations can be explained by the fact that options serve many strategic purposes beyond simple directional bets, allowing traders to bet on volatility and timing. This facilitates effective management of market risk in every situation.
A call option gives the holder the right, but not the obligation, to buy the underlying asset at a predetermined price at a later date. A put option provides the right to sell.
active downside hedging
The latest record high in BTC open interest is marked by the growing popularity of put options, which provide protection against bearish trends.
This is evidenced by the estimated open interest of $2 billion in the $100,000 strike put, making it as popular as the $120,000 and $140,000 strike calls. The $100,000 put represents a bet that the spot price of BTC will fall below that level.
“In contrast to previous records, this new OI milestone includes a notable concentration of put open interest around the 100K strike, highlighting active downside hedging by market participants. At this single strike, Deribit shows over 19k contracts open, representing over USD 2 billion in notional value,” Strijders said.
He noted that puts continue to trade at a premium to calls, although the relative richness of puts has declined in recent days, with some traders chasing higher strike out-of-the-money calls.
“Despite the major bearish stance, there have also been signs of renewed optimism over the past 24 hours. While major downside strikes have resulted in an increase in OI, notable call activity is increasing around 120K and above, suggesting traders are positioning for potential upside volatility or gamma risk,” Strijders said.