The crypto market has evolved into a dynamic landscape with various trading opportunities. One area that has gained significant traction is the crypto futures and derivatives market. With cryptocurrencies like Bitcoin and Ethereum taking center stage, investors and traders are turning to futures contracts tied to these digital assets in search of potential gains.
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Behavior of the dealers for the king coin
According to data from Glassnode, open interest for BTC futures contracts on the Huobi exchange hit a one-month high. However, interest in Bitcoin options trading was not limited to the Huobi exchange. Data provided by TheBlock suggests that open interest has surged on most bitcoin exchanges.
In the context of cryptocurrencies, open interest refers to the total number of active futures contracts that have not yet settled or closed. It serves as a crucial metric to assess market participation and potential liquidity in the crypto futures market.
At press time, a total of $8.72 billion worth of BTC options have been traded across various exchanges.
Source: TheBlock
The vast majority of most of these trades took place through Deribit. At the time of writing, Deribit accounted for 90.91% of all open positions originating from centralized exchanges.
Although open interest in bitcoin increased, bitcoin options volume on exchanges began to decline. In the last 3 months, the volume of these options has dropped from $32.17 billion to $13.56 billion.
Source: TheBlock
Traders are green, but optimists face the heat
Regarding the liquidations of these positions, it has been observed that the number of liquidations for BTC options has started to decrease in the last few days. Liquidations typically occur when traders are unable to meet margin requirements or maintain sufficient collateral to support their leveraged positions.
Smaller stock market liquidations can also be seen as a positive sign for market participants. Mainly because it suggests traders manage their positions better and avoid significant losses.
Despite the relatively small number of liquidations, there were significant disparities between long liquidations and short liquidations, with the former significantly outperforming the latter. This indicated that traders who had bet on the BTC price going up were suffering more losses than traders who were short at press time.
Source: Coinglass
What are Ethereum traders up to?
Not only did BTC see an increase in open interest, but data from Coinglass also indicated an increase in open interest for Ethereum futures over the past few months. At the time of writing, open interest for ETH across all exchanges is $5.60 billion.
Source: coin jar
Additionally, the put-to-call ratio for Ethereum declined during this period. A declining put-to-call ratio suggests that traders are much more optimistic about the future of ETH price and anticipate a positive development.
At the same time, ATM 7 implied volatility for Ethereum options dropped to 36.72%. This means that the implied volatility of Ethereum options with an at-the-money (ATM) strike price and an expiry period of 7 days has decreased.
A decrease in implied volatility indicates that the market is perceiving a decrease in the expected magnitude of Ethereum price fluctuations over the indicated timeframe. This decrease in implied volatility could be interpreted as a decrease in uncertainty or a perception of a more stable market environment for Ethereum options.
Source: TheBlock
Another indicator of a possible decline in Ethereum options volatility is the declining Ethereum variance premium. In the past few weeks, the variance premium for Ethereum has dropped from 17 to 14.
Realistic or not, here is ETH’s market cap in BTC terms
This showed that the difference between Ethereum’s implied volatility (expected future price volatility) and actual realized volatility was decreasing. A decline in the variance premium suggests that market expectations of future price volatility have converged more closely with historical volatility levels.
Source: TheBlock
HODLers’ outlook
However, the situation could soon deteriorate. BTC and ETH have seen their MVRV ratios increase over the past few weeks. The increase in MVRV ratios indicated that most holdings from these addresses were profitable. The profitability of their holdings could provide an incentive for addresses to sell.
If holders respond to this stimulus with a sale, it could lower the prices of these two cryptos in the future.
Source: Santiment
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