On June 21, the price of Bitcoin, the crypto asset (virtual currency) with the largest market capitalization, surged to $30,800, the highest level since April 14, BlackRock, WisdomTree), highlighting the sustained desire of institutional investors to support Invesco's Bitcoin ETF application.
A week ago, the price momentarily fell below the critical support level of $25,200, and the market trajectory abruptly shifted. As a result, traders are turning to options to pursue the gains.
On June 21, bitcoin options contracts worth $3.3 billion were transacted on prominent exchanges, including Deribit. This was the highest daily notional value in the previous three months, and Deribit accounted for over 80% of the global trading volume.
"This is the highest trading volume in the last three months," Lin Chen, Asia business development manager for Deribit, told CoinDesk, adding, "there is interest in buying call options."
Options grant the investor the right to purchase or sell the underlying asset (Bitcoin in this instance) at a predetermined price at a later date. Put option purchasers have the right to sell, while call option purchasers have the right to purchase. Traders frequently purchase calls as low-risk, leveraged favorable wagers.
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Traders favored call options with strike prices of $30,000, $31,000, $32,000, and $40,000 over the past 24 hours, according to Laevitas.
In the previous week, call spreads accounted for 45 percent of total blockflow. Block transactions are sizable orders that are executed on an OTC crypto liquidity network, such as Paradigm, and then listed on an exchange.
According to Patrick Chu, director of institutional sales and trading at Paradigm, rising prices have compelled some callover writers to purchase back favorable exposures. Call overwriting, which entails selling calls against your crypto holdings, is a common method for generating additional yield in neutral to negative markets.
In light of the sharp increase, the majority of investors, particularly option overwriters, are purchasing back the topside, according to Chu.
DVOL spu
According to Amberdata, rising demand for options drove the Bitcoin Volatility Index (DVOL) for Deribit to 59.24, its highest level since early April.
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DVOL measures Bitcoin's 30-day implied volatility (IV) as determined by Deribit's options order book. The implied volatility (IV) is proportional to the demand for an option. IV refers to an investor's anticipation of price volatility over a given time frame.
Chen of Deribit stated, "Increasing demand for alternatives has boosted DVOL."
When there is aversion to risk in traditional markets, IVs typically increase. Chen explained that when prices increase, Deribit's DVOL tends to rise.
Since the beginning of the year, Bitcoin implied volatility and current price have been positively correlated.
"During the last three days, DVOL has moved in response to recent headlines and isolated events. Over the course of the past two months, prices have been extremely stable and realized volatility has been generally low. "Volatility is in short supply, and people are desperate to make up for it," Chu stated.
