Open interest in Bitcoin options nears record high at $12.6 billion

Open interest in Bitcoin options nears record high at $12.6 billion

As of November 17, the open interest (OI) in Bitcoin (BTC) options markets is presently above $12.6 billion, which is approaching all-time highs.

Notably, this level of Option OI has been sustained for about a month now. It is equivalent to the highs reached during March and April of 2021, according to the blockchain analytics and intelligence firm Glassnode. As per the prominent crypto data platform:

“Bitcoin Options markets currently have over $12.6 Billion in open interest, near all-time-highs. This level of Option OI has been sustained for around 1 month and is similar to the highs during March and April.”

Bitcoin: Options Open Interest. Source: Glassnode

It’s interesting to note that the open interest in options on all exchanges has climbed in line with the rise in the price of Bitcoin. The fact that the Options open interest was near its maximum in April, when Bitcoin achieved an all-time high, should not be overlooked.

In conjunction with the price and trade volume, investors may use open interest to estimate the current sentiment in a given market. Traders and analysts consider that the proper interpretation of changes in OI may provide helpful information about the current market mood. 

For example, if the open interest rises in tandem with the volume and the price, this might indicate the beginning of a bull trend.

Open Interest on the Bitcoin/USD chart

Furthermore, we can observe a large dominance of call options for options expiring on December 31, 2021. With large open interest concentrations near the strike prices, Bitcoin bulls are wagering heavily; the bullish sentiment was echoed by analytics platform Glassnode, which pointed out:

 “The Bitcoin bulls are betting big, with large open interest clusters at strike prices of: – $100k (OI = $500M) – $120k (OI = $420M) – $200k (OI = $380M).”

Bitcoin: Options Open Interest by strike price. Source: Glassnode

What is Open Interest?

Open interest refers to the total number of outstanding derivative contracts (for options or futures) that have not been settled. In particular, open interest is used as an indicator determining market sentiment and the strength behind price trends.

If interpreted correctly, open interest may aid traders in making better choices. Open interest may well be one of the most important pieces of data as it provides insight into the activities of other traders. 

The amount of money that is moving into and out of the market is represented by open interest. For instance, the open interest in Bitcoin futures will expand as more money flows into the market. If, on the other hand, capital begins to flow out, the OI will decrease. 

As a result, rising open interest may suggest a bull market, while declining OI could indicate a bear market is underway.