Bitcoin options traders are setting their sights on much higher prices while the largest cryptocurrency flirts with its fairly recent all-time high.
The far out-of-the-money Bitcoin call options expiring on June 27 at the strike price of $300,000 has been a close second behind the $110,000 calls in terms of open interest on the crypto options exchange Deribit. The contracts expiring on June 27 have seen the most open interest, or total number of outstanding contracts, across all expirations.
“Options skew remains bullish across tenors, with OTM calls trading rich versus puts out to 1 year — suggesting upside positioning,” said Jeffrey Howard, head of North America at crypto brokerage firm Nonco.
Bitcoin was little changed at around $106,000 on Tuesday, or less than 3% below the record of $109,241 reached Jan 20. That was the day Donald Trump was inaugurated as US president for a second time. The price subsequently dropped by about 30% before rebounding in recent weeks.
The increase in open interest on Deribit over the last 24 hours has been concentrated at strikes above $110,000, with most hedging taking place at around $105,000 in the same period, according to data compiled by crypto analytics firm Amberdata.
The shift among options traders come as the the tension between the US and its major trading partners has eased with April inflation readings that are softer than expected.
“Market sentiment improved early in the week on the back of a surprise tariff détente between the US and China,” said Nikolay Karpenko, a senior client relationship manager at B2C2. “Inflows into crypto remain healthy, led by corporate treasury allocations and ETF demand, while macro traders appear more reluctant to re-enter on rate cut hopes alone.”
While volatility has been in decline with Bitcoin trading range-bond recently, the “call skew has steepened notably as renewed demand for topside optionality accompanies the recent rally toward all-time highs,” said Ravi Doshi, co-head of markets at prime broker FalconX.
The jump in short-term options that have strike prices in a relatively small range is also laying the groundwork for a what’s called a gamma squeeze, in which a change in price can trigger a rapid swing in the market.
If a large amount of call options are bought, the sellers of the options, usually dealers or market makers, need to hedge their exposure. The usual way to hedge is to buy the underlying instrument so that they are not exposed to directional risk.
“If we look at dealer positioning on Deribit for BTC, we see dealers being short a lot of gamma $110k as traders are buying options for new ATHs,” said Greg Magadini, Amberdata’s director of derivatives. “This is showing us that the market positioning is heating up in anticipation of new ATHs and once in uncharted price territory, there’s no telling how high BTC can go.”
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