Ether’s (ETH) options are having a fantastic year, with open interest in Deribit – the largest market for these options – having risen 315% to $158 million in the last two months, breaking the $150 million barrier for the first time in history.
Although Ether first emerged only to serve the users of the Ethereum platform as a wallet for use with applications developed on the platform, in the recent past it has emerged as the clear competitor to Bitcoin (BTC), being the second largest cryptomoney by market capitalization.
Emergence of ETH options
ETH options emerged mostly in March 2019, when Derbit launched Ether derivatives on its exchange, including options, futures and perpetuals. Nearly a year later, after Bitcoin’s halving and the general upturn in crypt currency prices in 2020, Ether options have been the main development to emerge from the Altcoins industry side.
To capitalize on this new market opportunity, the Chicago-based ErisX cryptospeed exchange launched the first US-based Ether futures contracts in the second quarter, which will even be regulated by the Commodity Futures Trading Commission. The Malta-based OKEx exchange has launched options on Ether to enter the race, and has gained commercial traction since its launch in June.
As noted by the crypto-currency derivatives analysis firm Skew in February, investors anticipated the growth of this market when it joined the BTC. Looking at the ETH/BTC spread for the six-month period, implied at-the-money volatility increased to a six-month high of 22%. Implied volatility is the standard deviation of the returns that traders are forecasting, and represents the market’s expectation of how risky an asset will be in the future. The peak meant that investors expected larger percentage changes in the price of ETH (in either direction) compared to BTC over the next six months.
Growth is not isolated
This phenomenon of options on Ether gaining traction in the second quarter is not exclusive to altcoin; it goes hand in hand with BTC options and cryptomoney derivatives in general, with the market witnessing historic highs of $602 billion in May. What is interesting is that after May, investor interest in BTC futures – the largest BTC derivative – has begun to wane.
Ethereum update indicates that version 2.0 is on its way
Total ETH options open interest
On June 12, BTC futures reached a low in 2020, while open interest in options on Ether continued to rise to an all-time high. Luuk Strijers, Deribit’s commercial director, discussed this increased interest in options on Ether with Cointelegraph, saying
„We see an increased interest in ETH options due to the price development since mid-March, the entry of new companies into the options space and the intensification of the sales efforts of our partners. The open interest is at all times high, around 157 million dollars or ~ 660 thousand contracts of which 279 thousand or 42% will expire on June 26, 2020“.07