Bitcoin options open interest on CME reaches all-time high

Bitcoin BTC +2.63% options open interest on the Chicago Mercantile Exchange, or CME, has reached an all-time high, according to The Block’s Data Dashboard. In the past 24 hours, options open interest on CME bitcoin futures contracts has reached almost $2 billion in outstanding contracts.

The same finding was observed by Velo Data, which shows options open interest on CME bitcoin futures reaching a high of $2.1 billion.

An increase in open interest signals a highly liquid market with many participants. Open interest refers to the total number of outstanding options contracts that have not been exercised. When there is an increase in open interest, it suggests an increase in sophisticated trader activity, with new contracts being created and added to the existing ones.

Data from Coinglass shows that the options open interest is weighed more toward calls than puts for the end of December expiry date, with 65% calls compared to 35% puts. When the volume of calls exceeds that of puts, it is interpreted as a bullish indicator.

Bitcoin futures traders betting on 2024 rate cuts

Options on CME bitcoin futures expire on the same day as the underlying bitcoin futures contract, which is the last Friday of the month. According to The Block’s data, the trading volume of bitcoin futures on the CME has reached $41 billion thus far in December.

“Traders in futures markets are increasing bets on rate cuts, speculating a reduction in the benchmark interest rate as early as March, with a further decline over the course of the next year,” Bitfinex analysts told The Block.

This forecast concurs with data from the CME FedWatch tool, which places the probability the U.S. central bank will cut rates by 25 basis points in March 2024 at 66.7%.