In the past few days, Bitcoin has kept hitting new all-time highs. This has sparked more investment interest, but some are wondering if it’s too late to get in.
Luuk Strijers, CEO of crypto derivatives platform Deribit, said that traders in crypto derivatives look very bullish based on data from the options market. They are betting that bitcoin has more room to rise.
Dow Jones Market Data says that on Wednesday, Bitcoin BTCUSD -0.92% got as high as it ever got, at $93,445. It was worth about $90,984 on Saturday morning, 151% more than a year ago.
Data from Deribit shows that there were about 79,216 open interest for call options on bitcoin options that expired on December 27. This is about twice as many as there were for put options, which were about 39,505.
Open interest is the sum of all the derivative contracts that are still open for an asset. A call option gives the holder the right, but not the duty, to buy the underlying object at a certain price by a certain date. A put option gives the holder the same right to sell. When there are more call options than put options, the price of the object is likely to go up.
The options that expire on Dec. 27 have the most open interest. These are call options with a strike price of $100,000, which shows that buyers think bitcoin could reach as high as $100,000 by the end of the year.
Deribit statistics shows that there was over 170% more open interest in call options (40,632) than put options (14,680) for options that expired on March 28, 2020. These options had the most open interest. The most people were interested in call options with strike prices of $120,000, $110,000, and $100,000,000.
“What do people do then?” “They are setting themselves up for more upside,” Strijers said over the phone.
Sean Farrell, who is in charge of digital asset strategy at Fundstrat, agreed with what was said.
It’s possible for bitcoin prices to temporarily level off, but Farrell wrote in a recent note that many of the signs that the market was about to bubble are not present at this time.
According to statistics from CoinGlass, the annualized funding rates, or the cost of borrowing money in bitcoin perpetual futures, briefly rose to as high as 59% on November 12. This was the highest level since March, but it fell back to around 12.9% on Friday.
In the past, though, Farrell said, the market could usually keep up levels of 20 to 50 percent per year for weeks before it ran out of steam.
“This level of leverage can last as long as there is strong spot demand and capital coming in,” Farrell said.
