The Recent Surge in Bitcoin Price Triggers Volatility and Options Market
The crypto market was taken by surprise as the price of Bitcoin experienced a significant increase. As expected, this spike in volatility had a profound impact on the options market, leading to fluctuations. According to key data, there are indications that Bitcoin’s value will continue to appreciate.
The Bitcoin Trade That Saw A 31x Profit
Data from the options platform Deribit analyzed the current state of the options market. Two weeks ago, the platform recommended purchasing call contracts, predicting profits for the upcoming weeks.
This forecast proved to be accurate with the recent price action of Bitcoin. Call contracts with strike prices at around $28,000 experienced a whopping 31x return in just two weeks, primarily influenced by the surge in volatility. These positions are expected to continue appreciating in the following weeks.
In a post by Crypto Researcher on Deribit, the following statement was made:
The old trader acronym, ‘The Bigger the Base, the Higher the Space’, comes to mind as Bitcoin consolidated between the 20,000 to 30,000 level during the last 18 months, and historically, those breakouts often predicted unbelievable upward momentum. We would advise against fading this rally as Bitcoin could only have started to gather momentum – the pain trade is higher.
Bitcoin Open Interest At 2021 High
In an exclusive interview with Bitcoinist, Luuk Strijers, the Chief Commercial Officer (CCO) for Deribit, discussed the recent rally. Strijers believes that the price movement has been significantly influenced by events surrounding the Bitcoin Spot Exchange Traded Fund (ETF).
The CCO stated that the speculation surrounding BTC ETFs has shifted investor sentiment and impacted the options market, favoring the upside. Consequently, investors have exhibited a more bullish outlook regarding the approval of the Bitcoin ETF, resulting in increased buying of call contracts, higher trading activity, and an upswing in buying pressure.
Deribit’s trading volume in the past 24 hours alone has surpassed $10 billion, as shown in the chart below. This activity is expected to continue as volatility rises, causing the price of call contracts to soar. Strijers stated:
With Bitcoin surging past $34k this morning, Deribit saw $5 billion in volume traded over the last 24 hours, with $3.3 billion in options alone. Additionally, total open interest on Deribit stands at $21 billion, nearing an all-time high that will likely be surpassed if the market rally continues.
Strijers also noted that the last time Deribit observed such high activity was during the 2021 bull run when Bitcoin reached $60,000. This suggests that the approval of a Bitcoin spot ETF has the potential to drive prices even higher in the short term, possibly by 15% to 25%.
Ultimately, the recent surge in the price of Bitcoin has created volatility within the crypto market, particularly affecting the options market. As investors remain optimistic about the approval of a Bitcoin ETF, the options market continues to skew towards the upside. This has resulted in significant profits for those who purchased call contracts, signaling the potential for further appreciation. As trading activity and open interest surge on platforms like Deribit, it remains to be seen how the market rally will unfold in the coming weeks.
