16 Aug 2022

Open interest in Ether options has overtaken BTC options

Futures premiums and funding rates in BTC remain low as trading activity in BTC derivatives dwindles. Meanwhile, Ether activity thrives, open interest in Ether options has reached a new ATH, overtaking the BTC options OI for the first time in history.
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Low activity in the bitcoin futures market
No major changes in futures basis amid flat market.
Source: Skew *Closed Saturday-Sunday
The bitcoin futures basis has seen a slight decline since last week, with CME trading at a small premium to the offshore exchanges. Binance’s basis has seen the most substantial decline falling from 2.9% to 1.9% over the last seven days.The low basis is coupled with muted trading volumes. Last week, the 7-day average trading volume in BTC futures reached its lowest level since December 2020. While bitcoin futures trade at relatively stable premiums, with few noteworthy tendencies, Ether futures still trade at a sharp discount to spot, likely driven by hedging and trading strategies related to the merge as mentioned last week.
Funding rates below neutral as open interest declines
Funding rates maintained negative levels throughout most of last week, indicating a lack of conviction for further upside.
Source: Skew, Bybit
Funding rates in perps are mirroring the stagnant trend in BTC futures and have mostly trailed in negative terrain far below neutral levels over the last week. Despite BTC’s strong upwards trend of higher lows, perp traders seem uninterested in adding long exposure, as the bitcoin derivatives market stays in a slow state. A substantial decline in open interest has accompanied the low funding rates. The BTC denominated open interest has declined from a peak of 360,000 early last week to 335,000 BTC, driven mainly by activity on Binance.
Open interest in Ether options has overtaken BTC options
The open interest in Ether options has reached a new all-time high, overtaking the BTC options open interest for the first time in history.
Source: Skew
Activity in Ether options has blossomed as Ethereum nears its merge date. The open interest in Ether options has now pushed to a new all-time high of $8.1bn, substantially higher than the current open interest in BTC options of $5.5bn.Three strike dates are particularly crowded, September 30th, December 30th, and March 31st, with $3,000 being the most crowded strike price.The implied volatility of mid-term strike dates (1-6 month durations) of Ether options are trailing at around 100%, whereas BTC options see far lower IVs trailing around 70%. While ETH options see a high open interest and an elevated put call ratio, options skew remains slightly positive, with puts remaining pricier than calls. This indicates that activity in Ether options is related to sophisticated trading strategies, with the predominant activity being related to buying and selling calls in ETH for various maturities.
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