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Institutions Pour $1 Billion in Bitcoin Option Yet Price Stays Range Bound

Last Updated August 4, 2023 2:35 PM
Omar Elorfaly
Last Updated August 4, 2023 2:35 PM

Key Takeaways

  • Bitcoin trading reaches a 4-month high
  • Bitcoin has yet to bounce back above $30,000
  • Potential reasons for market optimism and price stalling

Data from CryptoQuant  shows that Bitcoin trading activity increased by 24% in July, reaching over $940 million. Volumes in bitcoin (BTC) options also increased by 16.6% to $734 million, while ether (ETH) options registered a 60% increase to $207 million. 

Chicago Mercantile Exchange (CME) reports a substantial increase in Bitcoin options trading.

However, the price of Bitcoin still floats somewhere around $29,000 per token despite increased trading activity. 

CCData graph
CCData reports a massive increase in crypto options trading and sharp drop in futures contracts

Investors Are Optimistic

CME reports Bitcoin options trading significantly increased during July. The investment option provides investors with the right to buy or sell a digital asset at a predetermined price on or before a specific date.

The Exchange gives buyers the option to buy or sell one cryptocurrency futures contract at a specific price at some future date. CME offers both Bitcoin and Ether options based on the exchange’s cash-settled standard and micro BTC and ETH futures contracts.

“The increase in BTC options volume on the CME suggests that institutions might be hedging their positions with options as uncertainty remains in the market,” according to a CCData report .

Bitcoin Is Yet To Bounce Back

Ever since the $4,000 price increase for Bitcoin due to BlackRock’s ETF application, the token has not seen any further increases. As a matter of fact, BTC has dropped by almost 4% in value throughout July.

The ETF application that led to a tidal wave of financial institutions applying for similar ETFs was at risk of rejection until the world’s largest asset manager refiled its application, naming Coinbase as its surveillance partner.

However, since then, there has been almost no news about the application and investors are starting to show signs of doubt.

As a result, many investors are now opting for BTC and ETH options, rather than futures contracts. 

CCData shows a 17.6% drop in Futures volume on CME to $39.1 billion. Simultaneously, total derivatives trading volume (futures and options) dropped to $40.1 billion.

What Would It Take For BTC To Go Over $30k?

The market is already showing signs of optimism following Ripple’s triumph during its SEC litigation. Other crypto institutions such as Coinbase are now hopeful of the outcome of their own SEC lawsuits.

While a win for these institutions might signal a more stable crypto market, it’ll take more than that to give BTC the push it needs.

For one, many stakeholders, both private and governmental, are calling for clear crypto regulations that would help crypto institutions and investors navigate the market while avoiding legal challenges.

Second, the market is obviously in anticipation of BlackRock and Co’s ETF applications to go through. If the SEC somehow manages to process said applications smoothly, the market is likely to witness a surge of activity in expectations for an almost definite increase in BTC pricing.

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