As banks, governments, and institutions of many other kinds continue to buy in to bitcoin, financial products with a much more traditional feel than what we have seen for cryptocurrencies continue to be introduced onto the digital asset scene. One such offering are bitcoin options. Since January, investor sentiment in bitcoin derivatives trading has grown exponentially. In the current, post-halving world, bitcoin options continue to rise and that is good news for BTC prices.
Impact of Bitcoin Derivatives Trading
Bitcoin options contracts are a relatively new method of interacting with the world’s most popular cryptocurrency. While they have been around for a while, this year has seen an explosion in activity. The increased market volume for bitcoin options is partly due to new products made available by investment firms like Chicago Mercantile Exchange and Panama’s Deribit. Investors can now trade bitcoin and Ethereum in a variety of ways that have been traditionally been used for assets like stocks. With heavily leveraged crypto futures and options now extremely easy to access, it’s no wonder that this investment tool has become so popular as quickly as it has.
On Tuesday, there were more than $1 billion in open options contracts on Deribit’s trading platform. The volume marked a record on bitcoin options and shows that investors around the world have turned a favorable face towards cryptocurrency investments with a more conventional feel than what has been available to date. The $1 billion in open positions marks a record for the company and marks a gain of more than 260% since early January when the products were first made available.
Options trading volume is important in the grand scheme of things because they tend to indicate what the current investor sentiment within the crypto space. When buying options, investors are essentially betting on whether they think the underlying asset – in this case it is bitcoin or Ethereum – is going to go up or down in price. With unprecedented surges in derivatives trading taking place in the digital asset marketplace, it is likely that we will see some interesting changes for crypto volatility in the days ahead.
What is especially meaningful about the current trend of crypto options trading is that most of the big money involved comes from institutional investors. At the moment, the world’s biggest trading platforms offering crypto derivatives markets are seeing all time highs in both trading volume and value held in open positions which means institutional adoption of crypto assets have now officially taken root. With the third ever bitcoin halving behind us, there is a long road ahead for bitcoin’s next deflationary event which means we will likely begin to see more and more institutional involvement in bitcoin as the digital asset both matures as an asset class and becomes increasingly rare.