As Bitcoin Falls To $ 59,000, Some Traders Believe It Has Even More Room For Growth Through Year End
Bitcoin options open interest spikes as volatility on the cryptocurrency market rapidly increases. More and more traders are betting on Bitcoin calls of $ 100,000, but that doesn’t necessarily mean they believe the currency is reaching that price.
Rise in open interest
Options expiring on Dec. 31 have faced a strong spike in open interest after Bitcoin swiftly dropped to $59,000. Open interest on options is primarily distributed to calls rather than puts.
Call options are an alternative way of betting on the specified price of the asset. According to the data provided, traders mainly bet on call (buy) options with strong dominance.
Current open interest for $100,000 calls stays at $500 million, in addition to $200,000 calls having $380 million of open interest. In total, traders have bet over $ 1.3 billion on Bitcoin, rising to $ 100,000 by the end of the year.
Do traders actually believe in Bitcoin reaching $100,000?
While options were initially designed as contracts that allow you to receive the right but not have the obligation to purchase an asset for a price determined in advance, experienced traders tend to avoid such risks and use options differently.
Among professional traders, options are used to hedge positions in spot or derivative markets. When traders have large short positions open, analysts might open options contracts by paying relatively small fees, which they will lose if the price of the underlying asset does not reach the strike price.
In this specific case, traders could have opened short positions in the market and hedged them with call option contracts. But according to futures open interest and market funding data, there is no trackable amount of short positions open on the market currently, which means that traders are, in fact, betting on the growth of Bitcoin in the future.
