Bitcoin Options Point to Positive Signs After Rout, Traders Say

tech.hindustantimes.com:

Crypto is undergoing a historic bout of volatility, but options traders are seeing positive signs within the market in the wake of the ruckus and controversy that overtook digital-asset lenders and others in the sector.

Chris Bae, chief executive and co-founder at structured-derivative-solutions provider EDG and a former trader at UBS and Goldman Sachs, is looking at open interest and is tracking global exchanges that offer options trading.

“It doesn’t suggest that liquidity has thinned dramatically,” Bae said in an interview. “There’s a lot of data that suggests the maturity of the market has progressed and that in the options market in particular, it’s business as normal, to a large degree, when taking into context the environment that we’re in.” Bae added that bid-ask spreads seem reasonable.

The environment, of course, has been strained by a number of hacks, as well as combustions of stablecoin projects and foldings of big-name crypto hedge funds. Over the past few weeks, lenders, in particular, have shown instability, with Celsius Network and Babel Finance freezing withdrawals, and Three Arrows Capital, a major cryptocurrency hedge fund, facing liquidity troubles. And it’s all coming amid a less-accommodative monetary-policy background, where the Federal Reserve and other global central banks are furiously raising rates to combat price increases.

To be sure, the market is much different than during last year’s bull run. Open interest, or the total number of outstanding contracts, has come way down from its highs. OI is down a little more than $7 billion from a record of about $15 billion in October 2021, according to data from Skew. Volume is currently slightly below $600 million, compared with an all-time high