The options sector appears to be the “pharmaceutical sector” of the crypto market, demonstrating robust activity in both up and down market trends.
Take, for example, bitcoin listed on Deribit. options market, which continues to grow despite, or perhaps because of, the recent downward price trend. On Thursday, the number of active BTC contracts on the platform reached a record 453,820, each representing 1 BTC. Theoretical open interest, representing 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 reached a new all-time high of approximately $50 billion notional – a record in both number of contracts and dollar terms – highlighting sustained and growing market participation,” Luuk Strijers, CEO of Deribit, told CoinDesk.
Since the start of the year, open interest in the contract terms has more than doubled, demonstrating resilience as BTC rose from $110,000 to $75,000 earlier this year before rising to a new lifetime high above $126,000 earlier this month. Since then, prices have fallen sharply to reach $108,000.
Inelasticity to price movements can be explained by the fact that options serve multiple strategic purposes beyond simple directional bets, allowing traders to bet on volatility and time. This facilitates effective management of market exposure through thick and thin.
A call option gives its holder the right but not the obligation to purchase the underlying asset at a predetermined price at a future date. A put option provides the right to sell.
Active hedging in the event of a decline
The latest BTC open interest record is marked by the growing popularity of put options, which offer protection against downtrends.
This is evident from the $2 billion in notional open interest in the $100,000 strike put, making it almost as popular as the $120,000 and $140,000 strike calls. The $100,000 put represents a bet that the BTC spot price will fall below this level.
“Unlike previous records, this new OI milestone features a notable concentration of open put interest around the 100,000 strike price, highlighting active downside hedging by market participants. At this strike price alone, 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 with some traders seeking higher out-of-the-money calls.
“Despite dominant bearish positioning, the last 24 hours also reveal signs of renewed optimism. Although the OI put has risen during major declines, there is notable buying activity around 120,000 and above, suggesting traders are positioning for potential upside volatility or gamma exposure,” Strijers noted.
