The record $ 3.7 billion bitcoin options expire on January 29 as speculation mounts following recent volatility in the price of the cryptocurrency and growing interest in its derivatives.
On Monday morning, open options contracts were worth about 245,700 bitcoins ̵
Bitcoin options are contracts that give investors the right, but not the obligation, to buy or sell the cryptocurrency at a certain price within a certain period of time. They give investors a chance to make money by betting on how the price will go without having to trade the digital currency itself.
Deribit – the exchange that currently facilitates the most trading of bitcoin options – began offering the products in 2018. But interest has risen sharply in recent months as the price of bitcoins has risen to a record high of nearly $ 42,000. -early this month. It was about $ 36,960 on Monday morning.
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Option contracts worth about 101,000 bitcoins – or $ 3.7 billion at Monday’s prices – are due to expire on January 29, according to bybt.com, although not every option will lead to a deal. That’s more than the previous record of about $ 2.4 billion seen on December 25, according to Cointelegraph.
Options show that speculators are bullies for bitcoins. As of Monday, open interest in “calls” (which are broadly bets that prices will rise) was significantly higher than open interest in “puts” (bets that prices will fall).
“It simply came to our notice then [Bitcoin] has become, even by its own standards, in the last few months, “said Craig Earlam, a market analyst at currency company Oanda.
“The moves we see every day are amazing, so it’s natural to use the opportunities more often.”
The price of bitcoins has jumped over 300% in the last year and over 60% in the last month.
Analysts say central banks and governments are flooding economies amid the coronavirus pandemic as a key driver, while concerns about inflation and currency devaluation are also factors.
Still, the price of bitcoin is highly volatile, fluctuating by more than 10% on a daily basis. After reaching a record high of over $ 41,000 on Jan. 8, it fell to nearly $ 30,000 a few days later before rising again.
By asking for part of the action, investors have amassed products that give them exposure to bitcoin.
So far this year, Germany’s exchange-traded cryptocurrency BTCetc has traded more than 50m euros ($ 60m) a day, according to Deutsche Boerse. Grayscale’s Bitcoin Trust is also thriving.
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Options are also becoming an increasingly popular way to speculate on bitcoin. The market is supported by reputable institutions such as the CME Group, which are moving.
Nicholas Pelekanos, head of trading at blockchain NEM, said: “Due to the complexity of trading, the volume of options gives us a good indication of the number of sophisticated investors trading bitcoin.”
Seamus Donogu, vice president of sales at digital currency security firm Metaco, said: “Institutional adoption of bitcoin should stimulate continued core growth in futures and options volumes.”
Still, Erlam was more skeptical of what it meant to grow options trading. “The creation and adoption of these instruments is a step forward, but it does not take away from how highly speculative the instrument still is,” he said.
Analysts at JPMorgan said last week that bitcoin may have to cross the $ 40,000 mark again in the near future if the price rises further. If it does not rise soon, then “inertial” means that follow trends may force the price to fall, they warned.