Animal Spirit Returns: Bitcoin Traders Bet on $200,000

1. Traders flock back to $200,000 bitcoin call after three years, hitting $20M in notional open interest.
2. Deep out-of-the-money calls reflect confidence in Bitcoin tripling by year-end, mirroring 2021’s bullish sentiment.
3. Bitcoin’s climb to $69,000 drives total open interest on Deribit to an all-time high of $20.4 billion; Ether’s options hit $11.66 billion.

Bitcoin traders are rekindling their enthusiasm for high-stakes bets as they revisit the $200,000 call option after a hiatus of almost three years. This surge in interest reflects a reminiscent fervor resembling the cryptocurrency market’s boom in 2021.

Deribit’s latest data reveals substantial activity in the $200,000 strike bitcoin call, a staggering three times the current market rate. On Friday, the notional open interest in the Deribit-listed $200,000 call option reached an impressive $20 million. With $14.6 million locked in the December 27 expiry alone.

Bullish Sentiment and Speculation

Investors are making bullish bets, particularly on the $200,000 strike expiring on December 31. It is signaling confidence that Bitcoin could triple its value by year-end.

These deep out-of-the-money (OTM) calls imply a positive market outlook and are reminiscent of similar trends observed when Bitcoin last surpassed $60,000 in 2021.

Supply-Demand Dynamics

The renewed interest aligns with the consensus that Bitcoin’s forthcoming halving-induced supply reduction will tip the supply-demand balance in favor of the bulls.

The recent ratio of 1:10 suggests a growing demand. This is fueled in part by Wall Street’s embrace of U.S.-based spot Bitcoin exchange-traded funds.

Bitcoin’s surge to record highs above $69,000. This week has not only fueled interest in options but also led to a record-breaking open interest of $20.4 billion on Deribit. The overall options market is witnessing a similar trend. Ether’s options open interest is also reaching an all-time high of $11.66 billion.

Deep OTM Calls as Lottery Tickets

Deep OTM calls, while riskier, offer an attractive proposition with limited losses. The potential for substantial gains if the market surpasses the strike price before expiry. Market participants view these calls as akin to lottery tickets due to their affordability. This is relative to options closer to or below the market rate.

In summary, the resurfacing of animal spirits in the Bitcoin options market, particularly around the $200,000 call, reflects growing optimism and a renewed speculative appetite among traders, reminiscent of the market dynamics seen during the 2021 rally.