He crypto-market it has become a dynamic landscape with various business opportunities. One area that has gained significant traction is the Crypto Futures and derivatives market. With cryptocurrencies like Bitcoin and Ethereum taking center stage, investors and traders are delving into futures contracts tied to these digital assets in search of potential gains.
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Trader behavior for the king coin
According to data from Glassnode, open interest for BTC futures contracts hit a one-month high on Huobi. exchange. However, the interest in Bitcoin options trading was not just limited to the Huobi exchange. Data provided by TheBlock suggested that open interest on most Bitcoin exchanges had increased.
For context, open interest in the context of cryptocurrencies refers to the aggregate number of active futures contracts that have not yet settled or closed. It serves as a crucial metric to assess market share and potential liquidity within the crypto futures market.
At press time, a total of $8.72 billion worth of BTC options were being traded on various exchanges.
Source: TheBlock
The vast majority of these trades were happening on Deribit. At the time of writing this report, Deribit represented 90.91% of all open interest coming from centralized exchanges.
Although the open interest in Bitcoin was increasing, the volume of Bitcoin options on exchanges began to fall. In the last 3 months, the volume of these Options fell from $32.17 billion to $13.56 billion.
Source: TheBlock
Traders see green, but optimists brave the heat
Regarding the liquidations of these positions, it was observed that the number of liquidations of BTC Options had started to decrease in the last few days. Liquidations typically occur when traders are unable to meet margin requirements or maintain sufficient collateral to support their leveraged positions.
Lower exchange settlements can also be seen as a positive sign for market participants. Especially since it suggests that traders manage their positions better and avoid significant losses.
Despite the relatively low number of liquidations, there was a significant disparity between long liquidations and short liquidations, with the former outperforming the latter by a considerable margin. This indicated that traders who were betting that the BTC price would rise suffered more losses compared to traders who were short at press time.
Source: Coinglass
What are Ethereum traders doing?
Not only did BTC see an increase in open interest, but data from Coinglass also indicated an increase in open interest for Ethereum futures in recent months. At the time of writing, ETH open interest across all exchanges was $5.6 billion.
Source: wallet
Also, the Put to Call ratio for Ethereum decreased during this period. A decreasing put-to-call ratio suggests that traders are much more optimistic about the future of the ETH price and expect it to move on a positive trajectory.
Along with that, the ATM 7 implied volatility for Ethereum options decreased to 36.72%. This means that the implied volatility of Ethereum options with an at-the-money (ATM) strike price and a 7-day expiration period has decreased.
A decrease in implied volatility suggests that the market perceives a decrease in the expected magnitude of Ethereum price fluctuations over the specified time period. This drop in implied volatility could be interpreted as a decrease in uncertainty or a perception of a more stable market environment for Ethereum options.
Source: TheBlock
Another indicator of a possible decline in Ethereum options volatility is the Ethereum downside premium. In recent weeks, the Ethereum move premium has fallen from 17 to 14.
Realistic or not, here is the market cap of ETH in Bitcoin Terms
This showed that the difference between the implied volatility (expected future price volatility) and the actual realized volatility of Ethereum fell. A decrease in the variance premium suggests that market expectations for future price fluctuations have become more in line with historical volatility levels.
Source: TheBlock
HODLers Perspective
However, things could get worse soon. BTC and ETH saw their MVRV ratios rise in recent weeks. The increase in MVRV ratios suggested that most holdings in these addresses were profitable. The profitability of their holdings could incentivize addresses to sell.
If holders respond to this incentive by selling, it could drive down the prices of both cryptocurrencies in the future.
Source: Santimento
