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The total nominal open interest in <a href="https://en.coin-turk.com/bitcoin-anchors-above-30000-impacts-crypto-market-and-altcoins/”>Bitcoin (BTC) and Ethereum (ETH) options listed on Deribit, one of the leading crypto derivative exchanges, has surpassed $20 billion. The increasing interest in options indicates the complexity in the market. Moreover, Deribit will soon launch monthly BTC and ETH options worth billions of dollars, which could increase volatility in the cryptocurrency market.
Massive Surge in Crypto Options Market
According to data tracked by Swiss-based Laevitas, the locked dollar value of active Bitcoin and Ethereum option contracts on Deribit has reached a nominal open interest of $20.64 billion. This figure is almost the same as the peak recorded on November 9, 2021, when BTC traded above $66,000 or more than 90% above $34,170. In other words, the current open interest on a contract basis is significantly higher than that in November 2021.
Luuk Strijers, the Chief Commercial Officer of Deribit, commented on the matter, saying, “This milestone represents not only a significant victory for Deribit but also a clear indication of the increasing interest in options among our customers and the wider market growth, with almost double the outstanding contract count.”
Options are derivative contracts that give the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before a specific date. Buying a call option gives the buyer the right to purchase, while buying a put option gives the buyer the right to sell. The buyer of a call option indirectly indicates a bullish trend in the market, while the buyer of a put option indicates a bearish trend.
The record activity in crypto options means that investors and market makers will have more influence on determining the spot market price. Current data shows that market makers recently had a net short gamma position in Bitcoin. This suggests that option holders bought the largest cryptocurrency as the price rose to neutralize their overall risks and may have inadvertently accelerated the price rally.
$4.5 Billion BTC and ETH Options Contracts Expire Today
Today, at 11:00 AM GMT, $4.5 billion worth of BTC and ETH options contracts will expire on Deribit. Monthly and quarterly expiration dates are known to increase volatility in the cryptocurrency market.
Most of the open interest in Bitcoin is concentrated in in-the-money (ITM) calls or those below the market price of BTC. As Bitcoin rose from $27,000 to $35,000, investors grabbed calls in the past two weeks. An in-the-money option refers to a call option where the current market price of the underlying asset is higher than the strike price. It is said to be in-the-money (ITM) when the price of the underlying asset is lower than the strike price of the option.
Regarding the expiring options contracts today, Strijers stated, “The expiration of $4.5 billion worth of options is significant. This is a particularly high value, and a considerable percentage of ITM will expire due to the potential impact of recent market movements.”
