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Bitcoin Options Open Interest Nears All Time High – But Rise in Puts Could Presage Drop

Written by:
Aeon Flux
Published on:
21 August 2020
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Aug 21, 2020 at 10:48 UTC

https://commons.wikimedia.org/wiki/File:Maria_Prymachenko._Ukrainian_bull._1977.jpg

Maria Prymachenko. Ukrainian bull. 1977 (Ввласенко/Wikimedia Commons)

While open positions in bitcoin (BTC) options have risen to near record-high levels, it’s not necessarily a good thing for those hoping for the rally in the cryptocurrency to continue.

  • The total number of outstanding BTC options contracts – open interest (OI) – increased to $2.10 billion Thursday – just shy of the all-time high of $2.11 billion in late July, per data from Skew. 

2020-08-21-11-22-47Source: Skew

  • On its own, high open interest can indicate existing trends are likely to be sustained – suggesting BTC’s recent rally from $10,650 could continue.
  • But the number of bearish puts relative to bullish calls has recovered from -10.3% to -3% in the past four days. As the graph below shows – traders are offloading much of their call options onto the market.

2020-08-21-11-27-20Bitcoin options’ positioning since 00:00 UTCSource: Skew

  • This suggests bullish speculation is beginning to ease – a sign of investors anticipating consolidation or price drop
  • Indeed, BTC has already pulled back more than 5% from the 13-month high above $12,400 it reached on Monday. 
  • Unless buying action comes quick, downwards momentum could push prices down to $11,000, QCP noted earlier this week.

See also: Odds of Bitcoin Hitting Record High in 2020 Are (Slightly) Up, Options Data Suggests

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