The recent rise in the price of Bitcoin sent shockwaves across the crypto market. In particular, as with any spike in volatility, the options markets saw the most significant fluctuation due to the rise in volatility. Key data points towards more appreciation.
The Bitcoin Trade That Saw A 31x Profit, Too Late To Catch the
Data from the options platform Deribit explored the current state of the options market. Two weeks ago, the platform suggested buying calls (buy) contracts would yield profits in the coming weeks.
The forecast played out with the recent Bitcoin price action; calls with strike prices of around $28,000 saw a 31x return over the past two weeks, mostly driven by the volatility explosion. In the coming weeks, these positions could continue to see further appreciation.
Analyst Crypto Researcher stated the following in the Deribit post:
The old trader acronym, ‘The Bigger the Base, the Higher the Space’, comes to mind as Bitcoin consolidated between the 20,000 to 30,000 level during the last 18 months, and historically, those breakouts often predicted unbelievable upward momentum. We would advise against fading this rally as Bitcoin could only have started to gather momentum – the pain trade is higher.
Bitcoin Open Interest At 2021 High
In an exclusive interview with Bitcoinist, Luuk Strijers, Chief Commercial Officer (CCO) for Deribit, spoke about the recent rally. Strijers believes the price action has been dominated by the events around the Bitcoin Spot Exchange Traded Fund (ETF).
The CCO at the options trading venue claims that the speculation of the BTC ETFs has supported a shift in sentiment. These events have led to a skew in the options market, favoring the upside.
In other words, crypto investors feel more bullish about the Bitcoin ETF approval and have been buying more calls (buy) contracts. There has been an increase in trading activity as a result and an increase in buying pressure.
The chart below shows that Deribit has processed over $10 billion in trading volume in the past 24 hours alone. This activity will likely continue as volatility rises, pushing the price of calls contracts higher. Strijers told us:
With Bitcoin surging past $34k this morning Deribit, saw $5 billion in volume traded over the last 24 hours, with $3.3 billion in options alone. Additionally, total open interest on Deribit stands at $21 billion, nearing an all time high that will likely be surpassed if the market rally continues.
Strijers added that the last time Deribit saw this activity was during the 2021 bull run when the price of Bitcoin stood at $60,000. This fact shows the potential for a Bitcoin spot ETF to push prices much higher, at least as much as 15% to 25%, in the short term once the approval gets announced.
Cover image from Unsplash, chart from Tradingview