Bullish Signs Ahead as Nearly $4 Billion in BTC Options Set to Expire Next Week
Bitcoin options worth $3.7 billion will expire at the end of the month, according to data from Bybt.com. This caps an extraordinary month for Bitcoin, which has gone from $29,000 to nearly $42,000 this month. And there are still ten days left to go.
The extraordinary bull run has set numerous records for Bitcoin and the market. But among all distinctions, the growing landscape of the derivatives market is one of the best developments. Traders are now leveraging the top options trading platforms to devise more careful strategies, with more professional investors gaining exposure to Bitcoin.
Options Data Indicates Bullish Sentiment
The Bitcoin derivatives market has generally increased in both quality and quantity. Traders have moved to derivatives as a form of hedging, and also to study larger market momentum. These traders themselves are more skilled, and even include institutional investors.
Volumes have consistently been increasing in the past 12 months, and the number of call options have far exceeded puts. Despite the incredible spike in Bitcoin’s price, investors remain bullish, which goes to show the cryptocurrency’s strength as an asset.
Only last week, one options trader made an astonishing 9000% return on a January call. Of course, he was one in a million—so-to-speak—and that kind of return is largely a fluke. Some traders also suggest this as an example of how volatile Bitcoin is, which makes options investing challenging.
The takeaway from this is that the Bitcoin options market is far more mature than it was even a year ago. The arrival of more traders with better options trading strategies has given derivatives a greater legitimacy. The steadily increasing volumes and approval by institutions attest to this.
Volatility Exists, but Long-Term Trends Remain
The primary reason why some analysts shy away from options is because of Bitcoin’s volatility. But the asset has historically operated like this, in period cycles of growth and retraction. Craig Erlam, analyst at Oanda, has said that the wild movements result in a natural utilization of options.
The derivatives market focuses on the underlying future value of an asset, so options traders placing high bets is a good sign. Placing a bullish bet in an inherently riskier trade is a direct conviction in Bitcoin.
Sharp corrections as a result of volatility will result in some liquidations, but the overall outlook appears promising. Several prominent names, including Binance.US CEO Catherine Coley and Pantera Capital, have given Bitcoin a possible $100,000 this year.
The options volumes in the months to come will be very important for gauging Bitcoin’s year-end valuation. This is true for several reasons.
For one, more global regulation is expected, and secondly, we will see where Bitcoin stands in its growth and retraction cycle. If the predictions offered by analysts are even remotely close, then there is much momentum left in the market.
While it may be difficult to gauge where the market is going, the numbers are generally optimistic. Bitcoin has a tendency to go through multiple corrections in a bull run. Call option volumes suggest that traders are aware of the cryptocurrency’s unique cycle of growth and retraction.
What will be even more telling is the options trades volumes in the next few months. We will see if traders are going to call it quits and take profits, or if they see much more growth. If Bitcoin adoption rates are anything to go by, this could very well happen.
Where do you think Bitcoin is heading in the next three months? Are the options volumes and prices reliable? Let us know what you think in the comments below.