Bitcoin Options Volumes Rose During Price Drop, Then Died Off

The Bitcoin options volumes are again viral in the cryptonews as more contracts saw increased trading volumes during the spot trading. As the BTC price dropped heavily last Sunday and Monday, the interest has largely died off and the volumes are now back to a normal range.

In total, the Bitcoin options volumes on Monday reached $198.7 million which is the highest number ever recorded, according to data from the crypto trading analytics provider Skew Markets.

A likely explanation for all of this and the increased interest in options trading amid this week’s sharp sell-off is the investor demand for hedging, which is a form of financial insurance. For a trader, the goal of a hedge is to structure a trade such that if money is lost on one trade, some amount of money will simultaneously be made back on another trade. In a case like this, the hedging instrument is an option that pays out if the spot price of Bitcoin falls.

Anyways, the Bitcoin price news show that BTC is still below $8,000 and the bearish momentum is here. Despite the Bitcoin options volumes rising during the price drop, they quickly changed and died off.

Among the options exchanges tracked by Skew Markets, Deribit recorded by far the highest trading volumes over the past month. OKEx followed, after which was the institutionally-focused market CME. Once again, the Bakkt marketplace lagged far behind the competitors and showed no options trading volume at all on most days over the past month.

As expected, the Bitcoin options trading volumes appear to follow moves in the Bitcoin price quite closely, with large prices moves in the spot also attracting more trading activity in the options market as the demand for hedges increases.

Following the previous years’ growing interest in the Bitcoin futures, the Bitcoin options volumes are still a good indicator and something that has really taken off this year, with several new players entering the market. The most high profile among these was probably the Chicago Mercantile Exchange (CME) which opened the new Bitcoin options market on January 13 this year and saw a lot of interest.

Besides this, the market cap at $223 billion is still a worrying sign for many traders who desperately expect BTC to go above the $8,000 mark.