Bitcoin options trading volume hits all-time high as year comes to close

Bitcoin BTC -0.57% options trading volume has reached an all-time high ahead of Friday's end of month, quarter and year expiry date, according to The Block's Data Dashboard.

Monthly options trading volume for the largest digital asset by market capitalization has reached an all-time high of over $38 billion across major cryptocurrency derivatives exchanges. That includes $26.7 billion in BTC options trading volume on Deribit and an uptick in derivatives trading on OKX and Binance .

On Friday's options expiry, around $7.7 billion worth of options tied to bitcoin will expire on Deribit , marking a significant milestone for the derivatives exchange. The majority of contracts still outstanding on Deribit are calls, which provide the right, but not the obligation, to buy bitcoin at a set price. It's assumed that a trader who buys call options is implicitly bullish on the market, while a put buyer is bearish.

According to Deribit Chief Commercial Officer Luuk Strijers, there is a total of over $11 billion in combined bitcoin and ether options open interest ahead of Friday's expiry. "This marks Deribit's largest expiry thus far of which almost $5 billion will expire in the money," Strijers told The Block.

Open interest by expiration on the Deribit derivatives exchange.

'Largest amount ever'

"This is the largest amount ever as well, potentially resulting in above average hedging and trading activity. Beyond hedging we also see clients rolling positions to 2024 expiries and expect to see more of that closer to the expiry as well as afterwards. After the expiry all eyes and trading activity will be focused on the upcoming ETF decision," Strijers added.

The majority of calls expiring on Friday are for a strike price of $45,000, indicating that experienced traders had anticipated the digital asset's price would surpass that level by the end of the month. However, bitcoin has pulled back lower and was changing hands for $42,900 at 7:45 a.m. ET, according to The Block's Price Page .

CME bitcoin options trading volume hits all-time high

Monthly trading volume of Chicago Mercantile Exchange bitcoin options has also hit an all-time high, suggesting increased participation from sophisticated market players. According to The Block's Data Dashboard , CME bitcoin options trading volume reached $2.39 billion, with four days left in the month of December. Open interest on CME bitcoin options has also reached an all-time high of over $2 billion, ahead of Friday's expiry date.

Despite broad optimism, one metric suggests that bullish bets by derivatives traders are becoming harder to maintain.  According to CryptoQuant's weekly report, sell volume is now growing more than buy volume in bitcoin futures markets.

"The derivative markets are showing the highest level of funding rates in more than a year for bitcoin, meaning that traders are paying too much to open long positions," CryptoQuant analysts said.