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The price of Bitcoin (BTC) failed to break above the $ 20,000 level this week, but there were several records related to volume and open interest up to $ 19,484. A notable achievement was the open interest on aggregate futures contracts which reached $ 7.4 billion in derivatives trading.
As illustrated above, there has been a 110% increase in the past 6 months and it is also worth noting that the Chicago Mercantile Exchange (CME) now holds over $ 1.1 billion of these contracts. These data are indisputable proof of the growing institutional participation in the BTC markets.
Volume has risen to new highs, will BTC price follow?
The total volume of the cryptocurrency market also hit a record high on November 24. Some investors may assume that this is a bullish event, but it is important to remember that every trade has a buyer and a seller. So how can the entry of large sellers be considered bullish?
The total volume on each spot trade reached $ 285 billion this week, but there is always the possibility that some of these trades may have inflated their volumes. Despite this, $ 285 billion represents an 11% increase from the March 13 peak.
The Bitcoin options markets also set a new interest high that opened yesterday. These are the contracts that a buyer pays upfront to buy (call) or sell (put) at a predetermined price in the future.
Take note of how the current $ 5 billion open interest BTC options represent a 316% increase from the $ 1.2 billion level of just six months ago. While this includes both call and put options, this impressive increase in liquidity is a welcome event.
The open interest of options deserves special attention
Higher open interest tends to draw attention to new arbitrage banks and open doors for larger institutional clients. However, to better assess how professional traders are considering to continue the current bull run, the 25% delta skew options should be analyzed.
A positive delta skew of 25% indicates that put (sell) options cost more than similar call (buy) options, thus indicating bearish sentiment. On the other hand, a negative skew suggests an uptrend.
The graph above shows that the figure of November 24 at -27.5%, practically corresponds to its historical low. Unquestionably, this is an extremely bullish condition and the data indicates that options traders are unwilling to sell protection on the upside.
Therefore, even if the $ 20,000 level has yet to be broken, there is enough reason to celebrate a healthy market with no signs of excessive leverage or decreased investor interest.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your research when making a decision.
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