Where do the Bitcoin and Ethereum derivatives markets stand in the short and long term?

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The buildup of Bitcoin and Ethereum in the spot market continues, as the focus now switches to the futures market. Some intriguing observations can be made here, each of which demonstrates how Futures and Options have affected the spot market. Likewise, vice versa. Those hoping to profit from Bitcoin and Ethereum may find the derivatives market appealing.

How does the market look?

At the moment, the market is at its best in a long time. Both Bitcoin and Ethereum investors are in a solid spot as the Open Interest [OI] hit new highs today. Futures OI for BTC seemed to be at a 4-month high of $17 billion. The same was the case for ETH, with the OI standing at $14 billion.

That being said, it’s worth noting that the ETH market is in a much different position than the BTC market, varying in many ways.

ETH market has been hyper bullish

Volumes on 31 August and 1 September were almost close to Bitcoin’s levels of $41 billion. These volumes aren’t usual for ETH as the same mostly remain within the range of $30 billion. Plus, over the same time frame, when ETH volumes were close to BTC’s, daily liquidations touched a 3-month high of $194 million.

Ethereum Futures daily liquidations | Source: Skew

However, if you take a closer look, you’ll observe that most of these liquidations came from short contracts. Short liquidations for Ethereum rose to a monthly high of $130 million.

This transpired primarily because of ETH’s rally over the last 2 days, a period during which ETH went up by 18.81%. Right now, people are demanding stability from Ethereum’s market.

Ethereum Short liquidations | Source: Glassnode

BTC market has been steadily bullish

Daily volumes were remained within the typical range of $100 million at the time of this report. In addition, Bitcoin OI in Perpetual Futures contracts reached an 18-month high of $14.157 billion.

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These are encouraging numbers for a market that has been on a roll for over a month. Even the Implied Volatility to Realized Volatility spread appeared to be at its greatest level of 0.9 percent, which had previously been observed on May 30.

 

Bitcoin IV-RV spread | Source: Skew

One major reason for this is that the BTC spot market has been progressively rising, with a “mere” 4.83 percent increase in the last four days. Furthermore, with Bitcoin once again surpassing $50k, the OI by Strike’s 12k Call contracts for $50k appears to be getting profitable as the 24 September expiry approaches.

BTC OI by strike shows bets for $50k | Source: Skew

All in all, the derivatives market is in a really profitable state right now.

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