ver the weekend, trading volumes and open interest swelled for Bitcoin call options with strike prices of $65K, $70K, and $75K on Deribit, the largest crypto options exchange. These "out-of-the-money" calls reflect wagers that prices will surge past these levels by expiration dates in late 2022 and early 2023.
Bitcoin Traders Go Long With Cheap Out-of-the-Money Calls
According to Kelly Greer, Head of Americas Sales at Galaxy Digital, they've seen increased flows into long-dated calls at the $50K, $60K, and $75K levels over the last six months. This signals that experienced traders have confidence prices will eventually break above these hurdles. Greer notes similar positioning preceded Bitcoin's strong rally through the $30K and $40K resistance levels late last year.
Options Data Points to Continued Bullish Sentiment
The mushrooming open interest and trading volumes on these lofty calls implies growing conviction the rally still has room to run higher. It resembles trader behavior during Bitcoin's parabolic advance in late 2020 and 2021, when calls above $80K consistently attracted demand.
Additionally, the Bitcoin price is currently stabilizing above crucial support at $50K after nearly doubling from October lows. Inflows into crypto exchange-traded products (ETPs) also show sustained institutional interest. This bullish macro backdrop helps explain traders' appetite for upside calls.
Overextending or Room to Run?
Some technical indicators are flashing short-term overbought warnings, like Bitcoin's Relative Strength Index topping out above 70. Plus, Genesis' reported $1.6 billion crypto liquidation adds volatility risks.
However, traders' confident positioning in calls way above the money implies they see this as a speed bump rather than top. Options data has often signaled impending trends, and this flow profile resembles prior bull markets. Overall markets also remain risk-on, which could further uplift cypto prices.
Outlook Remains Bright as Traders Look Past Near-Term Risks
While risks of a pullback exist, the bullish options action indicates traders are looking past these concerns to better entry points higher. As long as institutional interest and macro factors remain supportive, upside calls may continue drawing steady volume. Their clustered concentrations point to upcoming resistance break targets traders have their eyes on. Though volatility may persist, the long-term outlook stays bright according to sophisticated options flows.
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