"This implies a lot of leverage in the market, but it is strange, the implied volatility is much lower than the last time OI was at this level, suggesting weaker interest from traders," said Noelle Acheson, author of " Crypto Is Macro Now". " Newsletter.
Although bitcoin and other cryptocurrencies had an exceptional start to the year, with the largest digital asset rising 39 percent in January, gains have not come so easily in recent weeks.
risk assets sold
The coin, along with other riskier assets like stocksit has eased since mid-February when investors begin to bet that the Federal Reserve will keep interest rates higher for longer.
To be sure, the high open interest of options does not necessarily mean that there is more leverage in the market. โOptions could be directionally agnostic,โ said Darius Sit, founder and chief investment officer of crypto options trading firm QCP Capital.
It was in the midst of this year's rally, in which Bitcoin tested $24,000 and $25,000, that the market saw a flurry of out-of-the-money (OTM) bull calls, said Christopher Newhouse, a crypto derivatives trader at GSR, a Native cryptocurrency market maker in spot and options markets.
This is because traders were expecting a definitive break above $25,000. Bitcoin had crossed that level on Feb. 16, though it has declined since then, data compiled by Bloomberg shows.
โThese OTM bets throughout February did not pay (as of now) as traders bought those OTM options at elevated levels of implied volatility (which has steadily declined while price has ranged), which which caused the buyers of those strikes to lose both from a long volatility perspective and from a long spot price perspective,โ he said.
Bloomberg
