Bitcoin Options $260 Million Block Trade Hints Strong Price Volatility In Feb

The world’s largest cryptocurrency Bitcoin (BTC) has remained relatively stable trading at $43,000 levels for a while. However, the Bitcoin options data suggests that investors could witness some price volatility going ahead.

Major Bitcoin Options Block Trade Can Have Market Implications

In recent market activities, Greeks.Live reports a notable development in the Bitcoin options space that could signal the next significant move for the cryptocurrency. While Bitcoin has experienced relative stability, a substantial block trade has caught the attention of analysts.

The significant trade involved the purchase of 1,500 sets of February Strangles coupled with the sale of 1,500 sets of April-wide Strangles, strategically designed to amortize the overall cost of the portfolio. Remarkably, the entire portfolio associated with this transaction held a notional value of $260 million, representing over 30% of the day’s total volume.

The accompanying profit and loss (PNL) chart reveals that the investor behind this trade is anticipating a substantial market movement of 10% or more in February. What makes this move unique is the uncertainty regarding the direction of this anticipated shock, a relatively rare strategy in large-scale investments.

Upon further analysis of the transaction data, it was observed that the investor had previously held a short position in 45,000 Call options expiring at the end of February, indicating a shift from short volatility to a long volatility stance.

Given the comprehensive examination of these details, traders shall exercise caution regarding short volatility positions, as the market may witness a notable 10% swing within the current month based on this substantial $260 million block trade. The strategic shift from short to long volatility also suggests a heightened expectation of increased market turbulence in the coming weeks.

Bitcoin And Crypto Market Snapshot

BTC’s major term option implied volatilities (IVs) have reached remarkably low levels, dropping below 40% for short and medium-term IVs. This makes the current market conducive for cost-effective buying. Currently experiencing oscillations, the break-even ratio for purchasing short-term options on the lower side is notably high.

In the cryptocurrency interest rate market, leverage levels are gradually increasing, showcasing a recovery from the recent low. Notably, high-interest orders have recently emerged, suggesting that individuals with surplus funds should consider re-entering the lending market to capitalize on the opportunity.

On the other hand, Bitcoin witnessed $703 million in net inflows last week as the demand for Bitcoin ETF continues to grow. Ark Invests’ Cathie Wood stated that Bitcoin has been slowly eating into the market share of Gold while emerging as a trusted store of value asset.