Experts who analyze Bitcoin options exchanges state that they do not see a decrease in liquidity. A Bitcoin option is a form of financial derivative that gives the right, but not the obligation, to buy or sell Bitcoin at a certain price until a certain date.
Analysts say the market is maturing, and there is plenty of data to show that it's largely normal given the context of the environment we're in, especially in the options market.
Of course, the market is going through bad times with hacks, the collapse of the Terra ecosystem, and major crypto hedge funds getting into trouble. Market instability has loomed over the past few weeks, particularly as credit platforms Celsius Network and Babel Finance freeze withdrawals, and Three Arrows Capital, a major crypto hedge fund, faces liquidity woes. And all this at a time when the Fed was relentlessly raising interest rates to fight inflation.
* Open Interest: the number of outstanding contracts or commitments in futures and options traded on an official exchange at any given time.
Of course, the market is very different from last year's bull run. The total amount of outstanding contracts has dropped drastically from its ATH peaks to date. According to the latest data, the total outstanding contract amount is around $7 billion today, up from $15 billion in October 2021. Volume is currently just under $600 million, compared to an all-time high of over $8 billion in October.
Analysts say the decline in the outstanding contract amount reflects market sentiment. Despite the bear market, there seems to be more and more TradFi investors or traditional finance users showing an interest in options trading, according to Bloomberg data. People are starting to trade options. This is an indication of why outstanding contract amounts have dropped less compared to the crypto market.
By the way, another difference in the crypto options market is that institutions start to do this trade. Today, corporate firms can use options to tailor risk management solutions or hedge portfolios or positions.