Deribit’s Record $23 Options Milestone Indicates Surge in Crypto’s Sophiscated Traders

2023-12-25, 08:16

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## [TL; DR]
The value of ETH and <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> options on Deribit reached $23.6 billion on 8 December 2023.

Gate.io exchange offers various crypto derivative products like perpetual futures, delivery futures and options.

Many traders use crypto options to hedge against trading risks.

## Introduction 
The invention of digital assets like cryptocurrency has brought more investment choices on the market. Apart from investing directly into cryptocurrencies institutions and individuals can trade crypto derivatives like options, perpetuals and futures.

Currently, as the prices of cryptocurrencies rise most of their derivatives have also gained much. This analysis looks at the developments in the crypto derivative sector due to the current bullish crypto market. We will also assess how [crypto derivatives like options contribute to the cryptocurrency market](https://www.gate.io/learn/articles/crypto-derivatives-explained/480 "crypto derivatives like options contribute to the cryptocurrency market").

## Bitcoin and Ether Options Record High Values 
On 8 December 2023 Bitcoin and Ether option values on Deribit, a cryptocurrency futures and options exchange, reached a record level of $23.6 billion. On that day institutions dominated the market, although the number of retail traders has been increasing during the year.

Bitcoin options, also called bitcoin notional open interest, accounted for 67% of the accumulative figure. In particular bitcoin options had a value of $16 billion while ETH had $7.6 billion. Since perpetuals and futures OI had a total value of $2.2 billion on that day, Deribit reached a $25.8 billion milestone.

By the end of the day, most open interest for both ETH and bitcoin were call options. The bitcoin calls were at $50,000, $40,000, and $45,000 strikes. On the other hand, most of ETH’s calls were at $2,300, $2,400, $2,500 and $3,000. The fact that the market had more calls than puts indicates an expectation of continued crypto rallies.

On 8 December, Deribit posted a message about its achievement on X. [It wrote](https://twitter.com/DeribitExchange/status/1733030536128708692 "It wrote"), “Record-breaking moment for Deribit as BTC and ETH options' value hits an all-time high of $23B. Increased interest in three-dimensional options trading signals growing participation of sophisticated traders in the crypto market.”

During that week bitcoin continued rallying as it attained a new price level for 2023, $44,000. The main push factors for the bullish crypto market are the expectation of the SEC approval of bitcoin ETFs and the declining U.S. Treasury yields.

Read also: [Crypto Prediction & Forecast for 2025, 2030](https://www.gate.io/price-prediction "Crypto Prediction & Forecast for 2025, 2030")

## Other Factors Contributing to the Bitcoin and ETH Option Value Surge
The value of crypto options depends on the downside risk of the underlying cryptocurrencies like ETH and BTC.  Downside risk is the possibility of the value of the underlying asset falling in the near future. Crypto investors that purchase put options, for example, simply transferred the downside risk to the seller.

Therefore, if there is a high chance of downside risks the hedge becomes more expensive. The time factor for the option and the volatility of the underlying asset determine the value of the derivative. Therefore, the current crypto market volatility is influencing the values of the options.

Read also: [Bitcoin Spot ETF Vs. Bitcoin Futures ETF](https://www.gate.io/learn/articles/bitcoin-spot-etf-vs-bitcoin-futures-etf/973 "Bitcoin Spot ETF Vs. Bitcoin Futures ETF")

Secondly, we are in a period where the market expects  prices of major cryptocurrencies like bitcoin and ETH to keep on rising. Specifically, the market expects the value of bitcoin to rise as we approach [the 2024 halving event](https://www.gate.io/blog_detail/1800 "the 2024 halving event"). The value of ETH is also likely to increase since, in most cases, it correlates with that of bitcoin. Therefore, the current positive crypto market sentiment is influencing the price of crypto options.

It is important, also, to note that a bitcoin option [or ETH option’s expiry period influences its value](https://www.gate.io/blog_detail/2530/bullish-bets-soar-as-ether-options-trading-volume-overtakes-bitcoin-fueled-by-shanghai-upgrade-demand "or ETH option’s expiry period influences its value"). Crypto options tend to be cheaper when their expiry periods are still further away. This means that as a bitcoin option expiry period draws closer its value rises.

Read also: [BTC or ETH: Which is The Better Long-term Investment?](https://www.gate.io/blog_detail/751/btc-or-eth-which-is-the-better-long-term-investment "BTC or ETH: Which is The Better Long-term Investment?")

## The Importance of Options in the Crypto Market
Crypto options are an important aspect of the cryptocurrency market as investors use them as hedges against falling prices.

The crypto investors purchase the options which are inversely correlated to their crypto trading positions. For example, an investor that opens a long bitcoin position will open a put bitcoin option to hedge against BTC price fall.

Read also: [How is Bitcoin a Hedge against Inflation?](https://www.gate.io/blog_detail/1171/how-is-bitcoin-a-hedge-against-inflation "How is Bitcoin a Hedge against Inflation?")

## Gate.io Trading Products 
We have discussed the importance of investing in crypto derivatives like options and perpetuals.
Crypto investors can purchase some of these products on cryptocurrency exchanges.

In fact, Gate.io has many investment products which include perpetual futures, delivery futures and options. Let’s briefly discuss some of these crypto derivatives.

Gate.io Perpetual Futures: [These products are similar to traditional futures](https://www.gate.io/futures/USDT/BTC_USDT "These products are similar to traditional futures") except that they have no settlement or expiration. The traders can bet on price movement of an underlying asset like bitcoin or ETH.

Delivery Futures: These are [derivatives of digital assets](https://www.gate.io/futures_center "derivatives of digital assets") which the traders settle using USDT or BTC. Note that these derivatives have expiry dates. At the expiry of the contract both the seller and buyer are obliged to honor the contract.

## Conclusion 
The value of Bitcoin and ETH options on Deribit, the cryptocurrency futures and options exchange, reached $23.6 billion. A positive sentiment in the cryptocurrency market has influenced the current uptick in the options market. Gate.io is another cryptocurrency exchange that offers crypto derivative products such as perpetual futures, delivery futures and options.

<div class="blog-details-info">
<div>Author:**Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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