Animal Spirits Return? Bitcoin Traders Lock $20M in $200K Call Option

Deribit records show bitcoin call activity at $200,000, roughly three times the market rate. Options open interest has reached historic highs amid bitcoin's price surge. The return of animal spirits has sparked interest in bitcoin {{BTC}} options, which might pay off if the cryptocurrency's price triples in the next months, similar to 2021.

Friday's Deribit bitcoin call option at $200,000 attracted nearly $20 million in notional open interest. The strike price is over three times bitcoin's $67,000 market price.

Deribit Metrics reports that $14.6 million is locked in the $200,000 call expiring Dec. 27, while the rest is in June and September expiry strikes. Buy the deep out-of-the-money (OTM) call at the $200,000 strike expiring Dec. 31 to wager the cryptocurrency will conclude the year above that level.

Call options allow investors to buy the underlying asset at a specified price later. Call buyers are market bulls. Current U.S. dollar value locked in active options contracts is called notional open interest. One options contract equals one BTC on Deribit, the main crypto options market. Last time bitcoin traded above $60,000 in 2021, the $200,000 strike call was popular.

The new interest in the deep OTM strike supports the idea that BTC's forthcoming halving-induced supply reduction would further skew the supply-demand mismatch in favor of bulls, pushing prices beyond six digits.

Wall Street's acceptance of U.S. spot bitcoin ETFs increased the supply-demand balance to 1:10. Bitcoin reached record highs around $69,000 early this week and closed near $67,000, up 59.7% year-to-date. The CoinDesk 20 Index, a market benchmark, rose 45%.

Options market activity increased with the upswing. Open interest in bitcoin options on Deribit reached a record $20.4 billion, surpassing the October 2021 peak of $14.36 billion. Ether's {{ETH}} options open interest reached a record high of $11.66 billion.

Deep OTM calls are cheaper than those at near to and below market rates. Thus, deep OTM call purchases are often compared to lottery tickets. The loss is limited to the option premium, but profit might be substantial if the market exceeds the strike price before expiration.