Bitcoin posted a strong 26.7% rally (as of press release) making spot trading very profitable for investors, but interestingly enough, the rally has benefited the derivatives markets as well. Observing metrics on the network shows that bitcoin futures and options work as well. The most interesting fact was the sudden rise in one particular indicator, which confirmed the rally.
Bitcoin derivatives are on the rise
For the first time in a month, liquidity in short futures has shown such a significant surge. The yellow bar peaked at $ 219 million, showing the total number of short positions liquidated on July 26th. This surge confirmed one thing – the main reason for the recent rally was in fact this short squeeze.
In addition to the increasing number of short liquidations, the Futures Open Interest (OI) also made some profit. After the May sale, the OI remained unchanged in the $ 10 billion to $ 12 billion range. This model has finally undergone a change as Futures OI is up $ 1.4 billion this week alone. Such an increased OI often increases the likelihood of a volatile leverage squeeze. With the growth of OI, the volumes of futures also did not lag behind.
For the first time in a month, futures volumes demonstrated such high daily futures contract volumes in the bitcoin market. On July 26, in just 24 hours, sales grew by $ 90 billion to $ 120 billion. This is evidence of increased participation in the derivatives market.
In addition, the volume of options, which on July 26 also increased by $ 1.1 million. With 1.2 million options volume, the market now seems stronger than ever.
Is hedging for the market or against it?
This is where it gets interesting. Technically, put odds always prevail over call odds, and people are hedging against an already suffering market. Until this happened recently. As of July 27, call contracts were relatively higher than put contracts: more than 1,513 BTC in $ 80K call contracts. Although people trade futures at a higher price, some have continued to play in the consolidation range of $ 29,000 to $ 40,000. Call strikes of up to $ 90,000 confirm the optimistic outlook on Bitcoin.
Those looking to enter the derivatives market may find the right time now. Just make sure your exits follow the pattern followed by the Bitcoin price movement.