The record-breaking Ether (ETH) price rally sparked a wave of activity in the options market, pushing the cryptocurrency to outperform bitcoin (BTC) for the first time in terms of trading volumes.
The ‘flippening’, along with the strong performance of ether prices over the past few weeks, is another sign that the market is temporarily moving away from bitcoin, the main crypto asset in terms of market value.
On Monday, four larger exchanges offering ETH options – Deribit, OKEx, Huobi and bit.com – recorded a combined trading volume of $ 1.32 billion, surpassing the Bitcoin total for the first time on record. The Bitcoin options market traded contracts worth $ 879 million on the same day, according to data source Skew.
Ether options volume skyrocketed as prices for the native Ethereum blockchain token hit a new lifetime high above $ 3,400 on Tuesday. While ether has risen over 60% in the past four weeks, bitcoin has fallen 3%, according to data from CoinDesk 20.
Options are derivative contracts that give the buyer the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy and the sale represents the right to sell.
Ether options volume has accelerated significantly since mid-April, with the dominant trading Deribit accounting for over 80% of total activity.
Open interest on ether options, or the number of traded but unsettled contracts with offsetting positions, rose sharply to new records above $ 5 billion per Skew. Meanwhile, open interest in the Bitcoin options market has waned in recent weeks, as shown below.
A similar divergence is observed in the activity of futures contracts linked to the two major cryptocurrencies.
Data represents a shift in investor focus from bitcoin to ether, with Ethereum seeing strong organic growth this year, as recently tweeted by Spencer Noon of DTC Capital.
A report released by digital asset manager CoinShares on April 26 showed that ethers funds and investment products saw an inflow of $ 34 million in the third week of April, while bitcoin funds lost 21 millions of dollars.
“Money from new investors has been pouring into digital assets since Q3 last year, but investor goals are changing,” noted Jeff Dorman, chief investment officer at Arca, in a market recap released Monday. “And over the past few months, investor interest has narrowed even further: ‘Can I specifically branch out from Bitcoin to Ethereum and other digital assets?’ ‘
Analysts predict a continuation of the upward race in the ether, with some bets on a rally at $ 10,000. Therefore, more traders and investors could join the Ether derivatives market with the aim of hedging their exposure to the spot market or taking bullish or bearish bets.
At press time, the Ether options market is decidedly bullish on the cryptocurrency with one, three and six month put-call biases trading well below zero – a sign of calls ( bullish bets) attracting more than demand than puts.