According to derivatives exchange Deribit, high Bitcoin options volumes indicate that there continues to be numerous interest and capital in crypto derivatives markets, but risk is now being fastidiously managed, which could explain Bitcoin's recent price movements.
Current Bitcoin trading near $90,000 “looks much clearer if you take a look at positioning and not only price,” the Coinbase-owned derivatives exchange said on Wednesday.
Bitcoin (BTC) appears to be stuck for major expiration on January 30 as a result of concentrated options open interest (OI) around current strike prices, he added.
This implies that “a significant slice of market exposure is structured through options somewhat than leveraged futures,” they explained.
“Traders are involved, but they’re using hedging and structured trades, not only directional leverage.”
Bitcoin has been trading in a range-bound channel since mid-November, finding support around $85,000 and resistance around $95,000 and fluctuating between the 2 levels.
Capital is accessible, but risk is managed
Deribit explained that top options volume on short-term courses, especially puts (shorts), suggests that traders are managing risk and price movements are more sensitive to hedging flows than external news.
“Recoveries can cover supply by de-risking, declines may cause buyers to regulate their exposure, and momentum often has to work harder to expand,” they explained.
“So it's not an absence of interest here. Capital is there. Risk is just expressed through tighter control, and short-term price behavior is formed by each positioning mechanisms and recent headlines.”
The total OI of Bitcoin options, which is the notional value of contracts which have yet to run out or close, is currently around $38.7 billion and has been steadily increasing this month, in accordance with CoinGlass.
Major Bitcoin options are looming to run out at the top of the month
According to Deribit, around $8.4 billion in face value of Bitcoin options will expire next Friday at the top of the month.
The put/call ratio is 0.54, meaning that nearly twice as many long contracts are expiring as short contracts. Maximum pain, the extent at which most contracts expire at a loss, is currently $90,000, and OI is most concentrated across the $100,000 strike price.
Bitcoin options OI after expiration. Source: DeribitCointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph's editorial guidelines and goals to offer accurate and up-to-date information. Readers are advised to independently confirm the knowledge. Read our editorial policies https://cointelegraph.com/editorial-policy
