(Bloomberg) — Bitcoin has clawed back to record highs, with some traders already looking to avoid further declines after the original cryptocurrency soared above $100,000 for the first time.
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There is growing demand for put options, contracts that give the buyer the right to sell an asset at a predetermined price within a set tie period. Puts with strike prices of $95,000 and $100,000 saw the largest open positions in the past 24 hours, according to Amber Data, which tracks digital asset market data. Demand for puts in the $75,000 and $70,000 ranges also increased.
“Analyzing by maturity, we find that put interest is mainly concentrated in late December and late January, with some late February included. “It's logical to hedge this big rally against the situation,'' said Luke Nolan, a researcher at crypto asset management firm CoinShares.
Deribit said puts are concentrated around expirations early next year, but total open interest in these contracts remains low compared to open interest in calls expiring around the same time.
Bitcoin finally hit 10 late Wednesday amid optimism that President-elect Donald Trump's choice of a digital asset advocate to be the next head of the U.S. securities regulator will push cryptocurrencies further into the mainstream. It surpassed the million dollar price level. Market leader Bitcoin has risen about 50% since last month's election.
The digital currency was little changed at around $99,100 as of 5:03 p.m. in New York. It had recently risen to $103,801.
Cryptocurrency traders continue to make leveraged bullish bets after multiple failed attempts to reach $100,000 in recent weeks.
The funding rate, an important indicator of leverage in the cryptocurrency market, is approaching an all-time high. The numbers show that traders are willing to pay high premiums to shore up bullish bets through perpetual futures contracts, which are the most common way for investors to double down on directional moves in the Bitcoin price. This is one of the methods.
“Bitcoin’s recent rally above $100,000 has caused funding rates to rise significantly, approaching the annual highs from March and nearing the all-time highs set in Q4 2021.” said Brian Strugatz, head of trading at crypto prime broker FalconX. . “This pattern reflects historical bull markets, where these spikes in funding rates are accompanied by strong price momentum, reflecting high demand for leveraged positions.”
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The bullish sentiment is also reflected in other areas of the crypto derivatives market. CME exchange expiration futures contracts, one of the most popular options for U.S.-based financial institutions to bet on digital assets, command high premiums, while offshore exchange Deribit options markets and black A newly launched options market based on The Rock’s Spot Bitcoin Exchange commands a hefty premium. -Trade funds point to a bullish outlook for the crypto market.
Short-term call options with strike prices in the $100,000 to $110,000 range rose the most in the past 24 hours, according to data compiled by Amber Data. The large overnight block included a naked call expiring on December 7th with a strike price of $100,000, according to crypto market maker Wintermute OTC trader Jake Ostrovskis. Call spreads of $110,000 to $160,000, which expire on January 25 next year, were traded for more than $2 million.
“The majority of open interest in the IBIT options market is focused on out-of-the-money calls. Additionally, the implied volatility of IBIT's 10 delta calls is higher as they approach expiry compared to contracts with longer expirations. contracts are much more expensive,” said Gabriel Selby, head of research at CF Benchmarks.
As past bull markets have proven, rising funding rates could set the stage for a pullback.
“Funding rates this high are usually temporary, and we haven’t seen anything like this since early March of this year, when funding on Deribit reached an annual high of 145% amid an ETF flow-led BTC rally. We didn't see any spike in funding rates,'' said Bohan Zhang, head of over-the-counter options trading at Abra.
Nathanael Cohen, co-founder of digital asset hedge fund INDIGO Fund, said funding rates are a good way to judge how overheated a market is, but they can be extremely dangerous as they can stay high for longer than expected. said it was dangerous.
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