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Crypto Options Exchange Deribit Registered Record Trading Volume in November
Deribit was busier than ever as FTX-induced uncertainty boosted demand for options or hedging instruments.
Updated Dec 8, 2022, 4:31 p.m. Published Dec 8, 2022, 8:14 a.m.
Deribit, the world's largest crypto options exchange by volume and open interest, has been busier than ever.
The number of ether options contracts traded rose 10% in November relative to October, reaching a record high of 8.9 million. Trading volume in options rose 17% to 778,000 contracts, nearing the record rally registered in January 2021, according to data sourced from Deribit.
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In nominal terms, the total options turnover rose 5% to $25.5 billion, with the exchange accounting for over 90% of the global trading volume. On Deribit, one ether and one bitcoin option contract represent 1 ETH and 1 BTC, respectively.
Volumes rose as Sam Bankman-Fried's exchange FTX, formerly the third-largest crypto spot and futures platform worldwide by volume, filed for bankruptcy protection, raising fears of widespread contagion.
"Market volatility and overall fear and unrest have resulting in trading opportunities (up 20% in overall volumes or + USD 8 billion) but perhaps more importantly clients were able to hedge existing portfolios," Deribit said in its monthly newsletter.
"Deribit has seen new record volumes in our options settlement as 778,000 BTC and 8.9 million ETH options contracts were traded in November," Deribit added.
Options are derivative contracts that offer the purchaser the right to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy and is akin to purchasing insurance against price rallies. The put option is a bearish bet offering the purchaser the right to sell.
Therefore, the demand for options is closely tied to the degree of uncertainty in the market. The higher the uncertainty, the greater the demand and activity in options.
That's what happened last month as traders snapped up protective puts in bitcoin, ether and Solana's SOL token in the wake of the negative news flow related to FTT.
"Options are great tools for risk management. They enable the ability to focus on more nuanced outcomes," Richard Rosenblum, co-founder of crypto trading firm and liquidity provider GSR, tweeted, referring to the increase in activity on Deribit.
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Solana CME Futures Fell Short of BTC and ETH Debuts, but There's a Catch
When adjusted for asset market capitalization SOL's relative futures volume looks better, K33 Research noted.
What to know:
- Solana's SOL futures began trading on the Chicago Mercantile Exchange (CME) on Monday, with a notional daily volume of $12.3 million and $7.8 million in open interest, significantly lower than the debuts of bitcoin (BTC) and ether (ETH) futures.
- Despite the seemingly lackluster debut, when adjusted to market value, SOL's first-day figures are more in line with BTC's and ETH's, according to K33 Research.
- Despite the bearish market conditions, the launch of CME SOL futures offers new ways for institutions to manage their exposure to the token, said Joshua Lim of FalconX.
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