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Investors flock to trade BTC and ETH options as open interest shoots 400% YoY

Investors flock to trade BTC and ETH options as open interest shoots 400% YoY
Paul L.

As the first quarter of 2023 comes to a close, it offers an opportunity to review how the cryptocurrency sector has performed over the last three months after encountering a historically extended bear market in 2022. Indeed, several products have witnessed a spike in investor interest as traders bet on a positive future. 

In particular, the market has recorded increased interest in options and trading activity of clients in Bitcoin (BTC) and Ethereum (ETH) in tandem with the respective asset price gains. According to data shared by CME Group, both contracts have reached a new milestone, with a record open interest of 15,089 contracts as of March 27. For the quarter, the estimated total contracts stand at 32,000, or a monthly average of about 10,666. 

By the end of the first quarter of 2022, the open interest in the two largest cryptocurrencies by market cap stood at an estimated average of 2,000. Therefore, the metric has registered a growth of about 430% year-over-year (YoY). 

Bitcoin and Ethereum options chart. Source: CME Group

Crypto market sustains capital inflow

The activity in the options markets coincides with a period in the general crypto sector is showing positive signs of recovering, considering the market cap has managed to hold above the crucial $1 trillion value to stand at $1.168 trillion as of March 31. The values represent a growth of about 32%, $373.07 billion, from January 1, 2023. 

However, the current market cap change represents losses of about 45% from the $2.16 trillion recorded at the end of Q1 in 2022. 

The global crypto market capitalization one-year chart. Source: CoinMarketCap

Despite being derailed by regulatory uncertainty and macroeconomic factors, big-cap assets such as Bitcoin have led the ongoing market resurgence, capitalizing on the banking chaos. 

With Bitcoin trading above $27,000, the maiden crypto has also been at the center of buying pressure, with quarter-one capital inflow culminating in a market cap of $532.58 billion, representing an additional $214.15 billion in the first three months of 2023. In comparison, at the end of the first quarter of last year, Bitcoin’s market cap stood at almost $900 billion. 

Furthermore, Ethereum successfully breached the $1,500 resistance, trading at $1,790 by press time buoyed by ongoing network activities. 

Other stand-out assets that have driven the market rally include XRP, which is target holding above $0.50 after successfully breaching the $0.40 resistance level following weeks of stalled trading. 

Crypto market Q2 2023 outlook

Although the crypto market’s performance in the first quarter can be considered positive, several headwinds remain ahead. The inflation situation and possible interest rate hikes are notable threats likely to push traders on the sidelines as they avoid risky assets. 

On the other hand, the evolving regulatory landscape, especially in the United States, is another factor to look out for. Notably, as the U.S. makes possible inroads in designing a digital dollar, it will be interesting to see how the sector reacts. 

At the same time, the market is also looking forward to possible bullish scenarios, with the upcoming Ethereum Shangai hard fork ranking among the most waiting events. Once live, the upgrade will allow traders to withdraw their staked ETH. 

Finally, it is worth mentioning that the outcome of the Ripple and the Securities Exchange Commission (SEC) case might impact the market’s trajectory. As the summary judgment date nears, speculations are rife that the blockchain firm is positioned to emerge victorious. 

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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