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CME’s BTC Options Grow by Record Volume After Bitcoin Halving

Bitcoin’s now-concluded halving event, which several in the industry cited as a price catalyst, seems to have revived institutional interest in a hyped, but overlooked trading product. 

Bitcoin Halving Spurs Options Interest

As reported by The Block on May 17, Bitcoin options at the Chicago Mercantile Group (CME) have surged since last week, coinciding with the weekend of Bitcoin having. Trading volumes and open interest – the latter calculates “buy” orders in a particular product – have surged significantly compared to other months.

Launched in early-2020, BTC options allow traders to bet on the future price of Bitcoin, serving as a hedge for long-term investors or a highly-leveraged play for speculators. Miners, on the other hand, are also a potential demographic as options allow them to protect against exposure to “spot” Bitcoin.

But the product did not attract widespread interest or volume. Daily volume remained abysmally low – even below $300,000 on some days, indicating poor demand. Meanwhile, volumes for similar BTC option products on crypto exchanges remained upwards of $5 million per day.

However, the volume has surged to over $10 million since May 12, as analytics by data firm Skew shows:

Open interest on May 11, one day prior to halving, stood at just $35 million but has crossed $142 million at press time. Option volumes hit $36 million on May 14, dropping to just $2 million on May 15.

Crypto-bourses reported mammoth volumes. Deribit turned over $149 million in options on May 14, while open interest, at the time of writing, is a massive $928 million.

Institutions Driving Growth

A CME post noted early-May that 2020’s halving was characteristically “unique” compared to previous events in 2012 and 2016, compared to the sheer size of the trading market and institutional developments in bitcoin-based trading products.

At the time, Payal Lakhani, CME’s head of crypto products, noted:

“A robust options market could also allow for additional income to be earned by miners or enhance long bitcoin positions which would further cushion the impact of the upcoming halving.”

The Block noted institutional entrants and miners could both be driving volumes on Bitcoin options. Billionaire fund managers like Paul Tudor Jones have now entered the bitcoin futures market, indicating several fund managers have already invested or are looking at Bitcoin as an investment.

Skew founder Emmanuel Goh believes rising institutional adoption of the product is driving growth. Meanwhile, Richard Rosenblum of GSR Trading noted a combination of the Bitcoin halving and the ongoing pandemic has likely Bitcoin brought in investors and professional traders, with both parties more likely to trade options and futures than spot Bitcoin.

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Crypto Stats

CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin54,745 0.69 % 4.03 % 8.62 %
Ethereum2,111.7 0.71 % 6.80 % 1.44 %
Binance Coin487.21 0.52 % 8.59 % 18.60 %
Tether1.000 0.15 % 0.08 % 0.17 %
Polkadot43.88 0.58 % 0.43 % 36.39 %
Cardano1.160 0.87 % 11.27 % 11.87 %
XRP1.270 1.53 % 13.77 % 13.35 %
Uniswap29.77 0.42 % 8.30 % 18.97 %
Litecoin247.46 1.70 % 10.76 % 1.12 %
Chainlink35.18 1.11 % 14.44 % 6.00 %