Options traders are loading up on bets that Bitcoin will surge to $50,000 by January, when many market observers expect the SEC to finally allow exchange-traded funds to directly hold the cryptocurrency.
That’s the price level with the largest open interest, or the total amount of outstanding contracts, to buy Bitcoin with call options that expire January 26, according to data compiled by Deribit, the largest crypto options exchange. Calls give the buyer of the contracts the right to purchase the underlying asset at a specific price within a set time period.
Bitcoin last reached $50,000 in December 2021. Digital assets were then in the midst of retreating from all-time highs with the Federal Reserve beginning to remove the record amount of stimulus added during the Covid pandemic.
“The bullish sentiment is thriving,” said Luuk Strijers, Deribit’s chief commercial officer.
Combined spot and derivatives trading volume on centralized exchanges rose 40.7% in November, to $3.61 trillion, the highest combined total since March, according to researcher CCData.
Activities in derivatives such as options and futures have continued to dominate crypto trading as they remain one of the few ways for investors to leverage bets after a slew of major crypto lenders imploded in 2022. In addition, cash-settled options and futures contracts can help traders execute their strategies without having to handle crypto-specific issues like custody.
“Volatility has been dropping like a stone for most part of the year,” said Jaime Baeza, founder and CEO at crypto hedge fund AnB Investments. “The environment has been low volatility, reduced volumes, reduced interest rates in the crypto ecosystem and overall reduced interest in the industry.”
Now with an Bitcoin ETF likely on the horizon and risk taking is returning to the broader financial markets, traders anticipate more interest in crypto.
“We’ve seen this year that as BTC moves higher, volatility has followed,” said Greg Magadini, director of derivatives at Amberdata. “So a sustained bull market might bring back some more volatility in the short and medium term.”