Middle Curver
Middle Curver 3 minutes reading from Bitcoin

What is the Bitcoin and Ethereum Exchanges Worth?

About 4B of BTC and ETH options expire tomorrow. What does it mean and what can we learn from this data? 👇

1/ What are options? Similar to futures, they're a form of derivatives. They can be defined as "contracts that give an investor or trader the right to buy or sell Bitcoin (but not the obligation) at a given price (strike price) and a specific date (expiration date)

2/ The strike price of an option is the price at which a put or call option can be exercised. It is also known as the exercise price

3/

contains charts of BTC and ETH options with 2 key metrics of : volume and open interest (OI), across different platforms (Deribit being the biggest one).

Coinglass-Cryptocurrency Derivatives Data Analytics -Bitcoin Open Interest-Grayscale Bitcoin TrustCoinglass-Cryptocurrency Derivatives Data Analytics -Bitcoin Open Interest-Grayscale Bitcoin Trust

4/ "Volume" refers to the number of contracts traded in a given period, and "open interest" denotes the number of contracts that are active, or not settled.

Image credit: @ChartGuys

5/ Which insights can we extract from this data? First - support and resistance. Large amount calls OI above the current price is considered resistance. Large amount puts OI below the current price is considered support.

6/ If we look at tomorrow's BTC expiry for example, we can see small resistance around 20-23k, and a big one at 25k (green spikes). More significantly , we can detect some big support at 18k.

7/ Options data can also give us clues about trend continuation, if we look at it day by day. - Increasing OI in calls + increasing price = bullish trend continuation. - Increasing OI in puts + decreasing price = bearish trend continuation.

8/ When OI are decreasing, it might signal a trend reversal. - Decreasing OI in calls + increasing price = bear divergence (look for signs of bearish reversal). - Decreasing OI in puts + decreasing price = bull divergence (look for signs of bullish reversal).

9/ I think this covers the basics.

Take it with a grain of salt, and as always - combine it with additional indicators to get a better picture.

I'm new to options and still have a lot to learn myself - feel free to share feedback🙂

10/ References and resources:

Options Open Interest as an Indicator by ChartGuys.comOptions Open Interest as an Indicator by ChartGuys.com
"How to trade Options" E9: What is OI and how to read it?
Options ArchivesOptions Archives
Deribit Metrics - DeribitDeribit Metrics - Deribit
This post is based on this twitter thread.

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