Bitcoin recently grabbed attention by breaching the $100,000 threshold, marking a significant milestone that has stirred up trading activities and strategic hedging among investors. This surge has sparked considerable interest in put options—agreements allowing buyers to sell an asset at a specific price—reflecting an eagerness to safeguard against potential declines, as highlighted in a Bloomberg report.
Rising Demand for Cautious Strategies
Amberdata’s figures show a notable rise in interest for put options, especially at strike prices of $95,000 and $100,000, which suggests strong hedging against a potential downturn. Interest in puts ranging from $70,000 to $75,000 is also on the upswing. Luke Nolan, a research analyst at CoinShares, points out that much of the put activity is focused on late December and January, indicating traders are bracing for possible corrections following Bitcoin’s hefty climb.
While this trading behavior underscores the buzz around Bitcoin, the open interest in put options is still overshadowed by call options, which give investors the right to buy the asset at certain levels. This discrepancy suggests that while caution exists, the bullish sentiment remains robust. Bitcoin has soared about 50% since the election, peaking at $104,000 before settling around $97,370 late Thursday. The funding rate—an indicator of the cost to sustain leveraged positions—has neared record highs, showing that traders are willing to pay hefty premiums to bolster their optimistic bets.
Brian Strugats, who leads trading at FalconX, notes this spike in funding rates is akin to patterns seen in previous bullish markets, where heightened funding rates typically accompany strong price movements.
Bitcoin’s Growing Importance, According to Tether’s CEO
Beyond Bitcoin’s impressive performance, other corners of the crypto derivatives market show positive signs. Futures contracts on the Chicago Mercantile Exchange (CME) have seen considerable premiums, while options markets on platforms such as Deribit signal a favorable outlook for cryptocurrencies. Short-term call options with strike prices of $100,000 and $110,000 have attracted significant activity, reflecting strong investor interest.
Despite the prevailing optimism, some market analysts warn that high funding rates could hint at an impending correction, a trend observed in earlier bull phases. Bohan Jiang, heading OTC options trading at Abra, stresses that while high funding rates might suggest an overheated market, they can endure longer than expected, adding risk.
Paolo Ardoino, CTO of Bitfinex and CEO of Tether (USDT), underscored the significance of Bitcoin surpassing the $100,000 benchmark, framing it as proof of Bitcoin’s resilience and growing trustworthiness as an asset during economic unease. Ardoino explained that Bitcoin goes beyond mere speculation, providing communities worldwide with access to decentralized financial systems, thus unlocking financial freedoms across borders. He further added:
“Bitcoin crossing the major $100K mark isn’t just about ‘numbers going up’. It’s a testament to its resilience and inclusivity. As a safety net in most worst-case scenarios, Bitcoin continues to deliver when traditional systems falter. The recent surge in institutional interest too has buoyed Bitcoin’s price, solidifying its position as a reliable asset even in times of economic uncertainty… With the current optimism around a more favorable US regulatory environment, the crypto industry is set for a pivotal and transformative year in 2025.”
The daily chart showcases the volatility in BTC’s pricing experienced on Thursday. Source: BTCUSDT on TradingView.com
Featured image from DALL-E, chart from TradingView.com
