A record $3.7 billion in Bitcoin is expected to expire on January 29 this year in what seems to be the clearest sign yet on the growing demand for the crypto.
Speculation on prices continues in a volatile period for Bitcoin. But there is no arguing that there are more and more people out there who are looking at these cryptocurrencies as possible investment derivatives.
As of Monday morning, open options contracts were worth around 245,700 Bitcoins, a figure that translates to roughly $9.1 billion. Bitcoin has seen its highs and lows in recent years. But ever since it launched, it has become the center of both controversy and increased investor appetite. The use of options to invest in this digital currency has also caught on.
Basically, Bitcoin options are contracts that give investors the right to sell or buy the crypto at a specific price within a set time frame. However, investors are not obliged to do so.
In essence, it is more or less a waiting game that gives investors to buy or sell the coins when a certain price has been achieved. The options give investors a chance to make money by simply betting how the prices will go in the future.
They do not trade in the currency at all. But despite this, Bitcoin options are fairly new. The options came into the market in 2018 through a company called Deribit. Over the last two years or so, interest in Bitcoin options has seen a sharp rise.
As a result, Bitcoin prices have shot up, reaching an all-time high of $42,000 over the last few weeks. At the time of writing this article, prices were currently at $32,000, one of the highest it has been in recent months.
More interestingly though, options contracts worth around 101,000 Bitcoin are expected to expire at the end of this month. This puts the total value of these options to roughly $3.7 billion based on the price of the coin at publishing this post.
The value might as well change over the coming weeks seeing how volatile the digital currency has been. Even though it is likely that not every option will result in a trade, it is still a record high. It is also an indication that digital currency speculators remain bullish about the future of this coin.
At the beginning of this week, the open interest in “calls”, which indicates investors are betting the prices will go up, was considerably bigger compared to “puts”, an indication that investors expect the price to dip. Even with the known volatility of the crypto, it seems like many investors have confidence in the price of Bitcoin going up in the near term.
And it’s not hard to see why there is this massive optimism. Over the last 12 months alone, the price of Bitcoin has soared 300% and over 60% over the last 4 weeks alone.