Bitcoin Options Open Interest Hits All-Time High

Bitcoin options open interest (OI) surpassed $15 billion on Deribit, the leading crypto options and futures exchange, on Friday, indicating that liquidity and interest are returning to the crypto markets.

What Is Open Interest?

Open interest is the total value of outstanding contracts that are as-yet unsettled, that is, "open" positions. Since regular traders usually buy and sell spot bitcoin, the increase to an all-time high of $15 billion indicates that professional and experienced traders are coming back to the markets. Deribit is the leading options and futures exchange, accounting for 85% of all volume.

Options give traders the right (but not obligation, unlike futures) to buy an asset at a pre-determined price, within a specified time frame. They offer a high degree of flexibility, and allow traders to hedge a position and manage risk, with limited downside, since the only upfront price they pay is the cost of the options contract.

"Total open interest in bitcoin options surpassed that of BTC futures for the first time. This shift signifies the market's maturation and growing sophistication," commented Deribit Chief Commercial Officer Luuk Strijers.

A Sign Of Things To Come?

The surge in open interest is a dramatic signal that life is returning to the crypto markets. In January this year, open interest on Deribit hit a low of $2.5 billion. The recent spike has seen it surpass volumes even at the peak of the bull market, at the end of October 2021, when OI passed $14 billion.

Open interest does not, in itself, signal that traders are bullish or bearish. It simply records the total amount of money that is betting on a market movement one way or the other. However, given that low liquidity has been a feature of the recent market lull, this is an encouraging indication that traders are returning to a hated and feared market.

Deribit's charts show that the largest tranche of money has been placed on "calls"—the option to buy BTC— for December 29. At present, there is a notional value of $3.7 billion for this date.

This shows that traders are heavily betting that BTC will rise in price by the end of the year.

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