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29 October 2020

Sharp Bitcoin price move brewing as BTC volatility falls to a 16-month low

Sharp Bitcoin price move brewing as BTC volatility falls to a 16-month low


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Bitcoin (BTC) options aggregate open interest has increased to $2 billion, which is 13% below the all-time high.

This is because increasing derivatives open interest leads to more extensive liquidations when a sudden price change occurs.

The current $4.2 billion in aggregate open interest might be modest compared to the August peak at $5.7 billion, but is still relevant.

High volatility is another critical factor holding back the open interest on Bitcoin derivatives.

Both options and futures have a lot of synergy, as more advanced strategies combine both markets.

This results in a net neutral impact on buyers (longs) and short sellers that might have been carrying open positions.

Due to its inherent high volatility, Bitcoin options might not be the optimal way to structure leveraged bets.

The above example does not invalidate options use, especially when building strategies that include selling call or put options.

One should keep in mind that options have a set expiry.

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cointelegraph.com
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