The options market is becoming a more integral part of Bitcoin’s market, seeing tremendous growth throughout 2020.
Less than a month ago, the benchmark cryptocurrency saw its largest ever options expiry, with nearly $1 billion in contracts expiring.
In the time since, however, options open interest has rebounded significantly and is now sitting around $1.4 billion. Ethereum’s OI has grown slightly faster than that of BTC and has already reached its pre-expiry levels.
It is likely that this OI could help catalyze some intense volatility in the near-term, helping to break the pattern of consolidation that has been plaguing the crypto.
One analyst is noting that Bitcoin’s technical structure suggests that this next bout of volatility will heavily favor bears, potentially leading it as low as $7,000.
Bitcoin Options Open Interest Passes $1 Billion
The options market was widely underutilized throughout 2019, although this trend has been shifting this year.
They are now becoming an incredibly popular way to trade Bitcoin’s volatility, and it is likely that the growth seen by this trading instrument will only continue mounting as the year goes on.
This fragment of the market is also gaining influence over the cryptocurrency’s price action.
As OI continues growing, monthly and quarterly contract expiries may help catalyze large price movements.
That being said, the recent $1 billion contract expiry did not cause Bitcoin to post any significant or anomalous price action.
Deribit – the largest options trading platform with an 80% market share – recently spoke about the growth options volumes have seen as of late, noting that the OI on their platform alone has grown to over $1.1 billion in the past few weeks.
The market’s total OI sits around $1.4 billion.
“Option volumes are picking up today. Total BTC options OI is currently around USD 1.1b, almost recovered from the June expiry. Our market share is ~ 80%. ETH options OI is already at pre-June expiry levels. Deribit’s market share is at 94%. Tik Tok, Tik Tok.”
BTC Volatility is Likely Imminent
The growing open interest across options platform and Bitcoin’s historically low volatility are both likely to lend themselves to it making a massive movement in the near-term.
As for which side this move may favor, the overnight decline towards $9,000 appears to have increased the odds that BTC will see further downside.
Josh Olszewicz – a popular cryptocurrency analyst on Twitter – explained that BTC has now entered its Ichimoku Cloud – opening the gates for a decline towards $7,000.
“1 D BTC: bearish e2e entry confirms today,” he said.
Image Courtesy of Josh Olszewicz. Chart via TradingView.
If Bitcoin’s options OI continues growing, the next major expiry may help catalyze this decline.
Featured image from Shutterstock. Charts and pricing data from TradingView.