Bullish Options Data Gives Hope to Ethereum, Bitcoin Investors
Large options trades that appear to be betting on a year-end rally for ethereum (ETH), and higher prices for bitcoin (BTC) in January, are getting the attention of some crypto traders.
The bullish bets on BTC and ETH were seen on Deribit, the crypto derivatives exchange that accounts for the majority of volume and open interest in the BTC and ETH options market.
Deribit Insights first shared the data on Twitter, saying that one large fund has spent USD 4m on bullish ETH call options expiring by the end of December with strike prices of USD 4,200 and 4,400.
They said that an individual “whale” has spent USD 2m on BTC call options with a strike price of USD 55,000 expiring in January.
Call options with strike prices above the current market price of an asset are essentially bets that the price will move above the strike price by the expiry date, triggering a large pay-out. If it does not, the option will instead expire worthless, and the money spent buying it – will be lost.
1) Tired Crypto market, driven by Macro + Pre-holiday de-risking, proving tough place to aggressively long Delta1 inventory.
— Deribit Insights (@DeribitInsights) December 20, 2021
But Option Flow turning Bullish.
Large Fund spends $4m on Dec 4.2+4.4k Calls,
Large Whale spends $2m on Jan 55k Calls,
Elsewhere Dec50k +Dec-Jan extending. pic.twitter.com/s0KwLJF4n0
Commenting on the action in the options market, Tony Stewart, the analyst behind Deribit’s weekly options market updates, described the trades as “verified bullish beta plays,” meaning that traders are betting on more volatility in the underlying spot market.
He also said that it differs from “some of the tactically perceived psyops of recent Call buying that were accompanied by an unwinding of Spot,” hinting that the spot market could see a stronger support from buyers this time around.
These latest Call purchases in BTC + ETH (32.5k of Dec31 4.2k+4.4k strikes) are verified Bullish beta plays, not some of the tactically perceived psyops of recent Call buying that were accompanied by an unwinding of Spot. https://t.co/y80K20YMeU
— Tony Stewart (@PelionCap) December 20, 2021
The notably bullish activity in the options market for ethereum in particular was also pointed out on Monday by Zhu Su, CEO and co-founder of Three Arrows Capital and a contributor to Deribit Insights.
“Reasonably sized ETH call buying on Deribit Exchange,” Zhu wrote, sharing a screenshot that showed large call option trades with an expiry at the end of the year for 14,000 and 18,500 contracts with strike prices of USD 4,200 and 4,400, respectively.
The 14,000 call option contracts with a strike price of USD 4,200 would give the options buyer the opportunity to buy ETH 14,000 for a price of USD 4,200 on December 31, and immediately be in profit if the spot price by then is higher than the strike price.
Reasonably sized $ETH call buying on @DeribitExchange
— 朱溯 🐂 (@zhusu) December 20, 2021
14k ETH 4.2k and 18.5k ETH 4.4k calls for Dec expiry pic.twitter.com/BJ78oLQkAS
Although the large trades in both the bitcoin and ethereum options market are implicit bets that the price will move higher, options are also used by individual traders and institutions to hedge risk, or as part of more complex market-neutral strategies.
As a result, interpreting options data can be challenging, but it nonetheless provides a valuable glimpse into how some of the largest players in the market are positioning themselves as the year is coming to an end.
At 14:49 UTC on Monday, BTC traded at USD 45,827, down 3.5% for the past 24 hours and 8.3% for the past 7 days. At the same time, ETH stood at USD 3,799, down 4% for the past 24 hours and 8.2% for the week.
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