Brussels, Europe Brief News –Crypto is experiencing unprecedented volatility, but bitcoin options traders are finding good indicators in the market in the aftermath of the uproar and controversy that has engulfed digital-asset lenders and many others in the industry.
Chris Bae, CEO of structured-derivatives provider EDG and a veteran trader at UBS and Goldman Sachs, monitors open interest and worldwide exchange that would provide options trading. “It does not imply that liquidity has dwindled drastically, “In an interview, Bae stated. “There’s a lot of evidence that implies the market’s maturity has developed and that, to a great extent, it’s business as usual in the options market, given the climate we’re in.” Bid-ask spreads are appropriate, according to Bae.
The ecosystem has been stretched by a series of hacks, the burning of stablecoin initiatives and the folding of significant crypto hedge funds. Lenders, in contrast, have demonstrated volatility in recent weeks, with Celsius Network and Babel Finance banning withdrawals and Three Arrows Capital, a prominent crypto hedge fund, experiencing liquidity issues.
And it’s all happening against a backdrop of less-accommodative monetary policy, with the Federal Reserve and other global central banks frantically boosting rates to battle price hikes. To be clear, the market is not what it was throughout last year’s bull run. The overall quantity of outstanding contracts, or open interest, has dropped significantly from its highs.
He claims that options can serve two purposes. The first is hedging, whereas the second is guesswork. “For one thing, as the number of assets invested decreases, there is less to hedge.” For two, individuals have a very bulk properties bias in crypto, so that when the market goes bear, people get rekt,” an allusion to the crypto community’s usage of the phrase “wrecked.”
Nonetheless, Chu claims that “more and more TradFi players” – or traditional-finance participants – are exhibiting interest in options. And they’re getting into the market, he adds. That might explain why, throughout the turbulence in the crypto business, OI levels have stayed steady.
Lastly, Bitcoin options, most of which have discovered themselves in hot water due to price drops for digital tokens, are ensuring their future growth, a shift from last year when they were not buying protection options during a bull market. “They are ready to pay a small premium to shield themselves against the risk of producing at a loss,” he remarked. “That was an intriguing shift.”