Trading volume records in bitcoin’s options market were smashed on Monday as investors scrambled to hedge their positions amid the sell-off.
Major exchanges – Deribit, LedgerX, Bakkt, OKEx, CME – registered total trading volume of $198 million, surpassing the previous record high of $171.3 million reached on Feb. 11, according to crypto derivatives research firm Skew Markets.
Deribit, the world’s biggest crypto options exchange by volume, contributed nearly 86 percent, or $170 million, of the total trading volume on Monday. Chicago Mercantile Exchange (CME) traded $2.1 million, while Intercontinental Exchange’s (ICE’s) Bakkt did not trade any contracts. Bakkt last registered activity on Feb. 27 and prior to that on Feb. 12.
An option contract is a derivative based on the value of an underlying instrument that gives the right but not the obligation to buy or sell the specified amount of an underlying asset on or before the expiration date. A call option gives the holder a right to buy, while a put option gives the holder a right to sell.
“Derivatives trading activity tends to increase when a large spot move occurs, which was triggered yesterday by an extraordinary sell-off in risk assets globally,” Skew CEO and co-founder Emmanuel Goh told CoinDesk.
Bitcoin (BTC) was trading above $9,000 on Friday and looked set for stronger gains over the weekend. However, the cryptocurrency fell sharply from $9,900 to $9,000 on Sunday, possibly due to liquidations by alleged PlusToken scammers, and it declined further to a two-month low of $7,640 on Monday.
The rapid price drop was accompanied by a sell-off in traditional financial markets like stocks and likely fueled demand for crypto options contracts.
“The sell-off has provided an ample amount of opportunities for both shorter-term traders and longer-term investors alike to acquire bitcoin and other assets at a significant discount to where prices stood just two weeks ago. Options are one effective way of taking advantage of these opportunities." Justin Gillespie, CEO of Titus Investment Advisors, told CoinDesk.
Volumes have been rising since the start of the year. For example, Deribit has witnessed an average daily volume of nearly $100 million over the past four weeks compared to $50 million in the period from December through January.
Bitcoin Rises With Risk Recovery in Traditional Markets
Bitcoin is witnessing a recovery rally alongside the traditional financial markets a day after slumping to two-month lows.
The cryptocurrency is currently reporting a 5-percent gain on lows near $7,640 registered on Friday, according to CoinDesk's Bitcoin Price Index. Major European equity index and the futures on the S&P 500 are also flashing green. Oil prices are reporting a 7 percent gain and the US 10-year note yield is trading at 0.70 percent, up nearly 35 basis points from Monday’s record low of 0.35 percent.
The risk recovery seems to have been triggered by hopes for fresh stimulus from U.S. authorities. President Donald Trump announced Monday that the White House and Congress will meet Tuesday to consider substantial economic relief measures, which may include a payroll tax cut.
From a technical perspective, the ongoing recovery in bitcoin could be extended toward Monday's high of $8,200, as signs of seller exhaustion have emerged on short-term technical charts.
That said, the bias remains bearish as long as prices stay below the head-and-shoulders neckline resistance, currently at $8,480.
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Bitcoin Options Saw Record Volume of $198M Amid Recent Price Drop