The open interest on Bitcoin (BTC) options is just five % short of their all time high, but almost one half of this amount is going to be terminated in the future September expiry.
Although the current $1.9 billion really worth of options signal that the market is healthy, it is nonetheless unusual to see such heavy concentration on short-term options.
By itself, the present figures shouldn’t be deemed bullish or bearish but a decently sized options open interest as well as liquidity is required to enable larger players to get involved in this kind of markets.
Notice how BTC open interest just crossed the $2 billion barrier. Coincidentally that is the identical level that was accomplished at the past 2 expiries. It is normal, (actually, it’s expected) that this number is going to decrease once each calendar month settlement.
There’s no magical level that must be sustained, but having options distributed all over the weeks enables much more complex trading methods.
Most importantly, the existence of liquid futures and options markets helps to help spot (regular) volumes.
Risk-aversion is currently at levels which are low To assess if traders are paying big premiums on BTC choices, implied volatility should be analyzed. Almost any unexpected considerable price campaign is going to cause the sign to increase sharply, whatever whether it is a positive or negative change.
Volatility is usually acknowledged as a fear index as it measures the average premium paid in the options market. Any unexpected price changes usually result in market makers to become risk averse, hence demanding a greater premium for preference trades.
The above mentioned chart clearly shows a massive spike in mid March as BTC dropped to its annual lows during $3,637 to immediately regain the $5K level. This uncommon movement triggered BTC volatility to reach the highest levels of its in 2 years.
This’s the opposite of the last 10 days, as BTC’s 3 month implied volatility ceded to sixty three % from seventy six %. Even though not an uncommon level, the rationale behind such comparatively low options premium demands further analysis.
There’s been an unusually high correlation between BTC and U.S. tech stocks over the past 6 months. Even though it is not possible to pinpoint the cause and effect, Bitcoin traders betting on a decoupling could possibly have lost the hope of theirs.
The above mentioned chart depicts an eighty % average correlation during the last six months. Regardless of the reason driving the correlation, it partly explains the latest reduction in BTC volatility.
The longer it takes for a relevant decoupling to occur, the less incentives traders have to bet on aggressive BTC price moves. An even far more crucial indication of this is traders’ lack of conviction which might open the path for much more substantial price swings.