Interest in Ethereum Options Surpasses Bitcoin, May Push Ethereum to New Highs

Editor's Note: This article comes fromCointelegraph Chinese (ID: CointelegraphChina), Author: ANIRUDH TIWARI, reprinted with authorization by Odaily.

Editor's Note: This article comes from

Cointelegraph Chinese (ID: CointelegraphChina)

, Author: ANIRUDH TIWARI, reprinted with authorization by Odaily.

Ethereum (ETH) options have had a stellar year, with open interest on Deribit (the largest market for these options) surging 315% to $158 million over the past two months, surpassing the $150 million mark for the first time.

Although Ethereum initially only provided wallet services for users of the Ethereum platform to use with applications developed on the platform, Ethereum has recently emerged as a clear competitor to Bitcoin (BTC), the second largest cryptocurrency by market capitalization. Big cryptocurrency.

The Emergence of ETH Options

ETH options mainly appeared in March 2019, when Deribit launched Ethereum derivatives on its exchange, including options, futures and perpetual contracts. Roughly a year later, ethereum options have become a major development in the altcoin space following the bitcoin halving and the general rise in cryptocurrency prices in 2020.

To seize this new opportunity in the market, Chicago-based cryptocurrency exchange ErisX launched the first U.S. ethereum futures contract in the second quarter, which will even be regulated by the U.S. Commodity Futures Trading Commission. Even Malta-based exchange OKEx has launched Ethereum options to get in on the action and has captivated the trading market since its launch in June.

When ETH was pegged to BTC, investors were already anticipating growth in that market, according to observations by crypto derivatives analytics firm Skew in February. Looking at the ETH/BTC spread over a 6-month period, the at-the-money implied volatility rose to a 6-month high of 22%. Implied volatility is the standard deviation of traders' forecasted returns, and it expresses the market's expectations of an asset's future risk. This spike suggests that investors expect a higher percentage change in the price of ETH (in either direction) than BTC over the next six months.

secondary title

Growth doesn't happen in isolation

On June 12, BTC futures fell to 2020 lows, while open interest in Ethereum options continued to rise to new all-time highs. Deribit Chief Commercial Officer Luuk Strijers discussed the growing interest in Ethereum options with Cointelegraph, saying:

“Since mid-March, we have seen increased interest in ETH options due to price performance, new companies entering the options space, and partners ramping up sales. Open interest is at an all-time high of about $157 million, totaling About 660,000 contracts, of which 279,000 (42%) will expire on June 26, 2020.”

Although the impact of the launch of ETH2.0 is subtle, as it will affect miners and investors in different ways, the outlook of the market seems to be positive about this change, which is also beneficial to the market and investment after BTC halving interests of the recipient. Strijers further added:

“We’ve also seen an increase in over-the-counter (OTC) interest leading traders to hedge in Deribit, which may be related to investor interest shifting to ETH following the BTC halving and the impending launch of ETH 2.0. Investors seem interested in 2.0’s potential Appreciation of the potential gains brought by the market, which may be one of the reasons for the rise in ETH prices since March. Investors believe that collateralized ETH will reduce the overall supply in the market and push up ETH prices.”

Use of Smart Contracts and Decentralized Finance

As the team behind Ethereum puts it, "Ethereum is a decentralized platform that runs smart contracts." Smart contracts run on the Ethereum Virtual Machine and are tools that help investors trade assets in a transparent and conflict-free manner, without intermediary services. Thus, smart contracts enable Ethereum to become a distributed computing network of blockchains with multiple usage scenarios. These, combined with a decentralized finance ecosystem, can also boost investor confidence and encourage institutional participation.

The rise of altcoins such as ETH, Komodo (KMD) and Cordano (ADA) is proof that cryptocurrency investors are looking to speculative avenues other than BTC. Cointelegraph interviewed Norbert Goffa, executive manager of blockchain storage system ILCoin, who commented:

"It's only a matter of time before ether options are launched. It's a good sign for the market as a whole. More new users and classic tools mean good financial performance for crypto exchanges, so that creates a favorable news backdrop. Ultimately, this has Helps integrate cryptocurrencies into the current economic system.”

secondary title

Cryptocurrency lending is key to driving Ethereum's decentralized finance ecosystem to over $1 billion in locked value. Essentially, this means that borrowers are able to use their crypto assets as collateral to take out fiat or stablecoin loans, while lenders provide the assets needed for the loan at an agreed upon rate.

According to Darius Sit, managing partner of crypto-asset trading firm QCP Capital, the firm has seen a massive shift of investors from lending to options, and the credit risk from lending to highly unregulated, refinancing-crazed platforms is evident in the market. , far exceeding the interest income. Regarding the viability of options in this unregulated lending situation, Sit further commented:

“With options, one is able to generate higher yields than with a loan. One is also able to better control the level of risk. With a loan, one can lose all of the loan amount due to default, one step away from collapsing multi-level refinancing It’s just a few steps away. With options (given proper risk management), you’ll have bigger returns and the ability to reduce downside risk.”

secondary title

Institutions are interested in ETH options

As previously analyzed by Cointelegraph, there is currently a mild short-term bullish sentiment prevailing across the market. To learn more about this involvement, Cointelegraph interviewed Alex Batlin, CEO of Trustology, a custody platform for crypto assets. "Institutional investors buy options because they believe the value of the asset is going to go up, so they want to have more exposure to maximize returns," he said, adding, "belief is the basis, and in this case , the opportunity to generate new revenue comes from ETH2.0 staking and the growing DeFi market.” On the launch of the new platform where these options can be traded, he further stated:

“New offerings from platforms like OkEx and ErisX suggest that there is ample reason to believe that new yield opportunities through staking and DeFi protocols, as well as lower barriers to entry due to maturing institutional-grade infrastructure, will drive institutional interest in ETH options .”

secondary title