Bitcoin has continued to hit new all-time highs over the past few days, leading to increased interest from investors, but also concerns about whether it is too late to join the game.
However, Luuk Strijers, CEO of cryptocurrency derivatives exchange Deribit, noted that based on options market data, cryptocurrency derivatives traders look overwhelmingly bullish, betting that Bitcoin has more room to rebound.
Bitcoin (BTCUSD) hit an all-time high of $93,445 on Wednesday, according to Dow Jones Market Data. On Saturday morning, it was trading around $90,984, up 151% over the past year.
For Bitcoin options expiring on Dec. 27, open interest in call options stands at about 79,216, roughly double that of put options, which stand at about 39,505, according to Deribit data.
Open interest refers to the total number of open derivative contracts for an asset. Call options give the holder the right, but not the obligation, to buy the underlying asset at a specific price at a set time, while put options offer the same right to sell. When the number of call options exceeds the number of put options, it is usually a bullish signal for the price of an asset.
Meanwhile, for options expiring on December 27, call options with a strike price of $100,000 have the highest amount of open interest, suggesting that investors are betting that Bitcoin could go as high as $100,000 by the end of the year.
According to Deribit data, for options expiring on March 28 next year, the open interest of call options is about 40,632, more than 170% higher than the 14,680 of put options. Among these options, the call options with strike prices of $120,000, $110,000 and $100,000 have the highest open interest.
“So what are people doing? They are positioning themselves for further increases,” Strijers said in a telephone interview.
Sean Farrell, head of digital asset strategy at market research firm Fundstrat, agrees.
Farrell wrote in a recent report that while it is possible to see a temporary consolidation in Bitcoin, many of the signs that previously indicated a bubble are not present in the current market.
The annualized funding rate, or the cost of leverage on bitcoin perpetual futures, spiked to 59% on Nov. 12, the highest since March, before retreating to around 12.9% on Friday, according to CoinGlass data.
However, Farrell noted that historical data shows that the market can usually sustain annualized gains of 20-50% for several weeks before losing momentum.
“This level of leverage can persist as long as it is combined with capital inflows and strong spot demand,” Farrell said.
