Bitcoin Options Contracts Open Interest Surges Following ETF Filings

Professional traders are flocking back to Bitcoin funds in the wake of multiple applications for exchange-traded funds by leading asset managers.

As a result, open interest (OI) for options contracts has soared to $13.8 billion, according to blockchain analytics firm Glassnode.

Furthermore, the increase in demand for Bitcoin options has pushed OI close to its all-time high of $15.1 billion, the firm added before commenting:

“This suggests market investors are increasing their exposure to risk-defined derivative instruments.”

#Bitcoin Options Contracts have experienced an increase in demand as Open Interest recently soared to a value of $13.8B, just $1.3B shy of the ATH of $15.1B.

This suggests market investors are increasing their exposure to risk-defined derivative instruments. pic.twitter.com/vZyQQJtVvw

— glassnode (@glassnode) July 5, 2023

Bitcoin Options Demand Surges

Open interest refers to the total number of outstanding derivative contracts that have not been settled. For each buyer of a futures or options contract, there must be a seller.

Options are similar to futures but do not have a fixed settlement date and have the ‘option’ to be renewed or extended.

According to Deribit, around $116 million in Bitcoin options are set to expire on July 6. However, this is a very small amount of options contracts compared to previous expiries. Around $1.7 billion options contracts are set to expire on July 28, which may have a bigger impact on markets.

It also noted that the put/call ratio for these contracts was 0.81. This means that there are slightly more calls than puts which is neutral but leaning to bullish.

The ratio is calculated by dividing the number of put (short) contracts by the number of call (long) contracts. Values lower than 1 are often considered bullish as more speculators are trading in long options contracts.

Bitcoin futures trading has also seen an uptick last month. According to data provided to the U.S. Commodities Futures Trading Commission, the number of traders maintaining futures position of at least 25 BTC increased from a recent low of 94 at the end of May to 121 by the last week of June.

Crypto Market Outlook

Bitcoin derivatives may be in high demand, but spot markets are continuing to decline from their recent rally. Total capitalization is down 1.2% on the day to $1.23 trillion at the time of writing.

BTC has dropped 1.1% over the past 24 hours in a fall to $30,516 as it struggles to break heavy resistance. Meanwhile, ETH has retreated a similar percentage to trade at $1,914 at the time of writing, according to CoinGecko.