Bitcoin Options Volume on Deribit Hits Highest Level in 22 Months as Bank Failures Breed Volatility


The trading of bitcoin (BTC) options listed on the cryptocurrency exchange Deribit has surged due to the recent U.S. bank failures and resulting market volatility. According to data from Amberdata, bitcoin options worth $2.4 billion were traded on Deribit in the past 24 hours, which is the highest daily trading volume since May 17th, 2021. At the time of writing, the number of contracts traded within 24 hours reached a record high of 99,195 BTC. Additionally, the notional volume in ether options over the past 24 hours was $948 million, the highest it has been since November.

Deribit uses one options contract to represent 1 BTC and 1 ETH, and it controls over 80% of the global crypto options market. Options allow traders to buy or sell the underlying asset (in this case, bitcoin) at a specific price, known as a strike, by a stated date. Call options provide the right to buy, while put options provide the right to sell.

Within a week, three U.S. banks have collapsed, resulting in financial market volatility and causing both traditional and cryptocurrency traders to seek options for protection. As a result, the volume of options linked to Wall Street's "fear gauge," the VIX index, rose to a four-year high last week, according to Reuters. 

Initially, Bitcoin faced pressure after Silicon Valley Bank closed on Friday, but it rebounded over the weekend. Since late Friday, prices have increased by almost 25%, with a gain of 9% in the past 24 hours. The banking crisis has weakened the argument for further monetary tightening by the Federal Reserve, leading to this increase in prices.

Bitcoin's seven-day annualized implied volatility (IV), which measures the market's expectation of price turbulence in the short term, reached a four-month high of 90% early today. The 30-, 60-, 91-, and 180-day gauges have also increased, indicating increased demand for options. Similarly, in the ether options market, the seven-day implied volatility rose to a two-month high of 77% earlier today.

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