Bitcoin Options Data Shows Whales Are Making Big Bets – Will $50K BTC Come January?

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Bitcoin (BTC) options open interest reached an unprecedented milestone, reaching $20.5 billion on December 7. This reflects the active participation of institutional investors in the cryptocurrency sector. Unlike futures contracts, BTC options have predetermined expiration prices, providing valuable insight into traders’ expectations and market sentiment.

The leader in the Bitcoin options market is Deribit, with 90% market share. The exchange currently has substantial open interest of $2.05 billion for options expiring on January 26. However, many of these bets may lose their value as the deadline approaches.

Deribit BTC Options Open Interest for Jan 26, BTC Terms. Source: Deribit

However, with the possibility of spot exchange-traded funds (ETFs) getting regulatory approval, previously sidelined bullish bets are re-entering the playing field.

How expensive is a Bitcoin call (buy) option?

Currently, the $54,000 call option expiring on January 26 is trading at 0.02 BTC or $880 at current market prices. Under this option the buyer needs to increase the value of Bitcoin by 25% in the next 49 days to make a profit. Sellers can hedge their positions using BTC futures while pocketing the option premium, reducing some of the perceived risk of this trade.

Analysts have emphasized the significance of the $250 million of open interest generated from $50,000 call options on Deribit. At the current price of $44,000, these options have a collective value of $8.8 million. This valuation could increase significantly if regulatory authorities give the green signal to spot ETF schemes. However, it remains uncertain whether buyers of these $50,000 call options intend to employ them for bullish strategies.

The relatively modest demand for call options within the $70,000 to $80,000 range, which is less than 20% of open interest, suggests a lack of enthusiasm among bulls. With an exposure of $285 million, these options are currently worth only $1.2 million. In comparison, open interest for the $60,000 and $65,000 call options expiring on December 29 is $250 million.

Turning to put options, it appears traders have positioned themselves cautiously for a January expiration, with 97% of bets placed at $42,000 or less. Unless the current price trajectory reverses, the $568 million open interest in put options may face bleak prospects. Nevertheless, selling put options may provide a means for traders to gain positive exposure to Bitcoin above specific price levels, although the exact impact remains challenging to estimate.

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Bitcoin Put Options Shouldn’t Be Dismissed Yet

Open interest in call options on January 26 is 2.6 times higher than put options on Deribit, indicating greater demand for neutral-to-bullish strategies. While the attractiveness of $50,000 call options is undeniable and has the potential to push the price of Bitcoin higher, it is essential to remember that the expiration price is only set at 8:00 am UTC on January 26, making it difficult to be on time. It happens first. This state.

For Bitcoin bears, the ideal scenario hinges on the ETF proposal being rejected. However, the United States Securities and Exchange Commission may request additional time to reach a final decision, especially considering recent amendments to many of the filings. Currently, industry experts, including senior ETF analysts at Bloomberg, estimate a 90% chance of approval in 2024, which is projected to extend beyond January.

With 49 days left until expiration on January 26, it seems unfair to prematurely dismiss 97% of put options as worthless. Additionally, bears have a looming regulatory outlook, as the trial involving Binance and its founder, Changzheng Zhao, has just begun.