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Bitcoin Options Open Interest Nears All Time High – But Rise in Puts Could Presage Drop
While soaring open interest can be a sign of a continuing trend, the offloading of calls suggests bitcoin could correct further.
While open positions in bitcoin (BTC) options have risen to near record-high levels, it's not necessarily a good thing for those hoping for the rally in the cryptocurrency to continue.
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- The total number of outstanding BTC options contracts – or open interest (OI) – increased to $2.10 billion Thursday – just shy of the all-time high of $2.11 billion in late July, per data from Skew.
- On its own, high open interest can indicate existing trends are likely to be sustained – suggesting BTC's recent rally from $10,650 could continue.
- But the number of bearish puts relative to bullish calls has recovered from -10.3% to -3% in the past four days. As the graph below shows – traders are offloading much of their call options onto the market.
- This suggests bullish speculation is beginning to ease – a sign of investors anticipating consolidation or price drop
- Indeed, BTC has already pulled back more than 5% from the 13-month high above $12,400 it reached on Monday.
- Unless buying action comes quick, downwards momentum could push prices down to $11,000, QCP noted earlier this week.
See also: Odds of Bitcoin Hitting Record High in 2020 Are (Slightly) Up, Options Data Suggests
Omkar Godbole
Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team based in Mumbai, holds a masters degree in Finance and a Chartered Market Technician (CMT) member. Omkar previously worked at FXStreet, writing research on currency markets and as fundamental analyst at currency and commodities desk at Mumbai-based brokerage houses. Omkar holds small amounts of bitcoin, ether, BitTorrent, tron and dot.
