Bitcoin (BTC) options aggregate open interest has increased to $2 billion, which is 13% below the all-time high. Although the open interest is still heavily concentrated on Deribit exchange, the Chicago Mercantile Exchange (CME) has also reached $300 million.
In simple terms, options derivatives contracts allow investors to buy protection, either from the upside (call options) or downside (put options). Even though there are some more complex strategies, the mere existence of liquid options markets is a positive indicator.
For example, derivative contracts allow miners to stabilize their income which is tied to a cryptocurrency’s price. Arbitrage and market-making firms also utilize the instruments to hedge their trades. Ultimately, deeply liquid markets attract larger participants and increase their efficiency.
Implied volatility is a useful and primary metric that can be extracted from options pricing. Whenever traders perceive increased risk of larger price oscillations, the indicator will shift higher. The opposite occurs during periods when the price is flat or if there is expectation of milder price swings.
Volatility is commonly known as a fear indicator, but this is mostly a backward-looking metric. The 2019 spike seen on the above chart coincided with the $13,880 peak on June 26, followed by a sudden $1,400 decline. The more recent volatility spike from March 2020 happened after a 50% decline occurred in just 8 hours.
Indicators signal a wild price swing in the making
Periods of low volatility are catalysts for more substantial price movements as it signals that market makers and arbitrage desks are willing to sell protection on lower premiums.
This is because increasing derivatives open interest leads to more extensive liquidations when a sudden price change occurs.
Investors then need to shift their focus to futures markets to assess whether a potential storm is brewing. Increasing open interest denotes either a higher number of market participants or that larger positions are being created.
The current $4.2 billion in aggregate open interest might be modest compared to the August peak at $5.7 billion, but is still relevant.
High volatility is another critical factor holding back the open interest on Bitcoin derivatives.
Despite 57% being the lowest figure in the past 16 months, it still represents a sizable premium, especially for longer-term options. Both options and futures have a lot of synergy, as more advanced strategies combine both markets.
A buyer betting on a $14K strike for the March 21 expiry in 160 days must pay a 10% premium. Therefore, the price at expiry must reach $15,165 or 34% above the current $11,300.
As a comparison, Apple (AAPL) shares hold a 41% 3-month volatility. Although higher than the S&P 500’s 29%, the long-term impact versus Bitcoin’s 47% has striking effects. The same 34% upside for a March 2021 call option for AAPL shares has a 2.7% premium.
To put things in perspective, if an APPL share were priced at $11,300, this March 2021 option would cost $308. Meanwhile, the BTC one is trading at $1,150, which is almost four times more expensive.
Betting on $20K? Options might not be the best way
Although there is an implied cost to carrying a perpetual futures position for more extended periods, it hasn’t been burdensome. This is because the funding rate of perpetual futures is usually charged every 8 hours.
The funding rate has been oscillating between positive and negative for the past couple of months. This results in a net neutral impact on buyers (longs) and short sellers that might have been carrying open positions.
Due to its inherent high volatility, Bitcoin options might not be the optimal way to structure leveraged bets. The same $1,150 cost of the March 2021 option could be used to acquire Bitcoin futures using a 4x leverage. This would yield a $1,570 gain (136%) once Bitcoin reaches the same 34% upside required for the option break even.
The above example does not invalidate options use, especially when building strategies that include selling call or put options. One should keep in mind that options have a set expiry. Therefore if the desired price range occurs only the following day, it yields no gain at all.
For the bulls out there, unless there is a specific price range and time frame in mind, it seems for now sticking with perpetual futures is the best solution.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Sharp Bitcoin price move brewing as BTC volatility falls to a 16-month low
Blockchain Startup Scores Pro Fighters League Deal to Reach MMA Fans
Blockchain startup Socios has added the Professional Fighters League to the roster of sports organizations on its platform, paving the way for broader cryptocurrency adoption in the MMA, a combat sport. The PFL, which is known for organizing MMA fighters into a sports-season format, joins a lineup that includes FC Barcelona, Juventus, and Paris Saint-Germain, […]
The post Blockchain Startup Scores Pro Fighters League Deal to Reach MMA Fans appeared first on BeInCrypto.
Blockchain startup Socios has added the Professional Fighters League to the roster of sports organizations on its platform, paving the way for broader cryptocurrency adoption in the MMA, a combat sport.
The PFL, which is known for organizing MMA fighters into a sports-season format, joins a lineup that includes FC Barcelona, Juventus, and Paris Saint-Germain, to name a few sports organizations that have also partnered with Socios.
The PFL deal represents the maiden league partnership that Socios has scored. The news is timely with the bitcoin price currently on a bull run.
The Professional Sports League and Socios are launching Fan Tokens, the official name for which has yet to be decided but is akin to cryptocurrencies that MMA fans can use to participate in the ecosystem.
The new partners will launch what’s known as a Fan Token Offering (FTO), which has the potential to familiarize a whole new demographic with digital currencies and the blockchain.
PFL CEO Pete Murray told BeInCrypto,
“There is incredible demand for MMA, it is the growth sport of the decade with over 450 million fans worldwide. These fans are young, passionate and digitally-savvy. PFL is leading the way in taking fan engagement to the next level, empowering them, and ensuring their voices are heard through cutting edge technology.”
The token sale will begin ahead of the 2021 season, which begins in April 2021. Sportico reports that previous Fan Token Offerings have generated sales in the range of $700K to $1.5 million at a price of approximately $2.50 per token.
The MMA boasts some 450 million fans, and the PFL’s social media profile has been on the rise, with the following YoY growth across its channels:
- Instagram followers up 68%
- Audience growth across digital = 30%
- Social engagement increase of 200%
Token holders reportedly gain access to certain benefits, such as the right to vote on decisions and earn rewards via the Socios app, which is available on Apple and Android. Fans can participate in decisions such as fighter bonuses across the “regular season, playoffs and championship.”
MMA fans can also earn PFL-themed rewards and get to test-drive some new features, including a “leaderboard, chat and games,” all of which are meant to fuel fan engagement.
MMA fans might already be well versed in cryptocurrencies. Retired MMA fighter Ben Askren first came on the cryptocurrency scene with his involvement in the Litecoin project. Last year, Litecoin sponsored Askren for UFC 235, a fight he won.
Since then, Askren has become even more engaged with the cryptocurrency community, from touting the latest bitcoin halving to hosting his own podcast with Litecoin Foundation Chief Evangelist John Kim.
Dubbed the Funky Crypto Podcast, its mission is to “educate the masses about Bitcoin, Litecoin, and cryptocurrencies.”
There are no immediate plans for the Fan Token to be sold on exchanges.
Stellar Lumens, Cosmos, Nano Price Analysis: 22 October
To the delight of bullish investors, a surging market was the highlight of the day, with many of the industry’s altcoins closely aping Bitcoin’s own price movements.
At press time, Bitcoin was being traded near the $13,000-level, having risen by over 4.5% in the last 24 hours. Further down the cryptocurrency charts, Stellar Lumens, Cosmos, and NANO followed suit, recording bullish movements of their own.
Stellar Lumens [XLM]
Up by 2.5 % over the past 24 hours with a valuation of $0.0857 at press time, the digital asset marked a notable high from its recent lows seen over the previous week.
In fact, the dotted markers of the Parabolic SAR were below Stellar Lumens’ price candles and underlined an uptrend for the coin. The Relative Strength Index, while noting a slight downturn, was still near 60 and pointed to buying pressure in the market.
The present scenario, being bullish, may see the digital asset further rise well above its support level at $0.0852. At the same time, price stabilization along this level also remains a likely scenario.
The Chaikin Money Flow was noted to rise above zero, underlining a surge in buy liquidities as the level of capital inflows became greater than the outflows and established a strong bullish trend in the Cosmos market.
The simple moving averages were bullish too, with the 9 SMA (yellow) seen above the 20 SMA (cyan). The golden cross thus confirmed a bullish ATOM market as it approached the $5.557-level of resistance.
In related developments, Cosmos recently released an upgrade for Stargate, an open-source community bounty rewards program for finding low, medium, and high-risk vulnerabilities in the Cosmos ecosystem.
NANO, at the time of writing, was trading comfortably above the 50% retracement level marked by the Fibonacci retracement tool.
With near-term technical indicators painting a bullish picture, NANO’s price was closing in on its September highs.
The Awesome Oscillator also displayed a clear bullish zero-line crossover, signaling a positive trend for the short-term.
A flip of the 23.6% region or the $0.919-resistance level to support may solidify the bullish trend further, a scenario that may unfold after brief price corrections over the next few days.
$900 Imminent? Analyst Claims Ethereum is Ready for an Explosive Move Higher
- After days of underperformance, Ethereum’s price is finally catching up to that of Bitcoin
- The second-largest digital asset saw a massive overnight rally that led it all the way up to highs of $415 before it found any resistance
- This surge marks a notable climb from its recent lows of sub-$370 that were set just a few days ago
- It has also reinvigorated altcoins, with ETH’s uptick in price allowing many smaller assets also to push higher
- Some analysts even believe it will reignite the DeFi trend
- One trader is now noting that ETH’s macro strength could lift it over 100% higher in the coming months, targeting a move to $900
Ethereum’s severe underperformance of Bitcoin seen throughout the past few days is currently being erased, with bulls aiming at it seeing further upside as it continued breaking all of its near-term resistance levels.
This uptrend comes as Bitcoin consolidates just below $13,000. Overnight, it maintained nearly all of its recent gains, which is a positive sign for buyers.
Where the entire market trends next will continue depending largely on Bitcoin, but one analyst is now noting that ETH could rally to $900 based purely on its independent macro strength.
Ethereum Surges Overnight, Erasing Underperformance of BTC
Earlier this week, Bitcoin kickstarted the ongoing uptrend when it broke above $12,000, but this move came about in the absence of any upwards momentum seen by altcoins.
Yesterday, however, this trend shifted as major altcoins began seeing notable momentum.
Ethereum rallied as high as $400 before facing strong resistance that sent it back below $390. Since then, it has rallied significantly higher.
It is now trading up well over 5% at its current price of $415. It does appear to be facing some resistance at this level.
Analyst: ETH Could Rally to $900 as Macro Market Structure Strengthens
While speaking about where this imminent bull trend could lead Ethereum, one analyst explained that he is watching for an over 100% upswing past $900 in the coming few days.
“Successful retest for ETH on the weekly time-frame. The next few months will be insane. Not much to say other than see you at $900,” he explained while pointing to the below chart.
Image Courtesy of Galaxy. Source: ETHUSD on TradingView.
How Bitcoin trends in the coming few days will undoubtedly influence Ethereum. However, ETH may soon be able to gain independent momentum.
Featured image from Unsplash. Charts from TradingView.
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