Bitcoin Options Open Interest Surges Past $1.5B ahead of Fed Minutes

• Bitcoin options trading across multiple exchanges posted their best open interest figures since January 2019.
• The value of the total number of outstanding contracts went past $1.5 billion, according to Skew.
• The data appeared ahead of the Federal Reserve’s monetary policy release today at 1430 ET.

Bitcoin options trading across a total of five derivative exchanges have posted their lifetime best open interest figures.

According to data aggregator Skew, the valuation of the total number of unsettled contracts has surged past $1.5 billion. That amounts to a $500 million increase only a month after the open interest breached the $1 billion mark.

Long Squeeze Risks

The latest data comes a day after Skew noted an incredible surge in the options contracts that will expire on June 26, 2020. The portal highlighted that traders are opening new positions for the said date since the beginning of May 2020, adding that a majority of those contracts were ‘call.’

Su Zhu, chief executive of Three Arrows Capital, also spoke about the extremely bullish positions on Tuesday, noting that Bitcoin’s open positions on the Chicago Mercantile Exchange were “nearly entirely in calls (upside moves).”

The bullish bias surfaced despite Bitcoin’s repeated failure to maintain its price rally above $10,000. One trader noted that the difference between the cryptocurrency’s spot and derivative markets risked a long squeeze.

“I flipped neutral for now. Funding has gone positive everywhere and there are a bunch of BFX longs underwater,” he said on Tuesday.

Federal Reserve’s Policy

Bitcoin has failed to break bullish above $10,000 twelve times since February 2020. Nevertheless, a majority of options traders believe the cryptocurrency could surge past the strong resistance level in its attempt before August 26, 2020.

The reason behind their bullish bias could be a supportive macroeconomic outlook. Interestingly, the bitcoin options OI moved past $1.5 billion just a day before the conclusion of Federal Reserve’s monetary policy meeting at 1430 ET Wednesday.

Zachary Griffiths, a macro strategist at Wells Fargo Securities, told CNBC that he expects the U.S. central bank to keep interest rates near zero while continuing its quantitative easing program to aid its ailing economy.

Rick Rieder, a chief investment officer of global fixed income at BlackRock, repeated the same, adding that the Fed would continue its expansionary policy in the light of a higher unemployment rate in the U.S.

The central bank’s stimulus package announcement earlier helped Bitcoin recover by more than 150 percent from its March 2020 lows below $4,000. If it maintains the same policy moving forward, then it puts the cryptocurrency in a bullish spot for the rest of the second quarter.

That partially explains why derivative traders are majority long on Bitcoin.