A surge in cryptocurrency market activity was noted by the esteemed Chicago Mercantile Exchange (CME), a heavyweight in the derivatives world. The trading volume of crypto options notably swelled by 24% to $940 million in contentious July, marking the first surge in four months, as reported by CCData. The uptick can largely be ascribed to the volatility and uncertainty that pervaded the market, motivating investors to employ hedging tools.
Interestingly, the trading volumes of Bitcoin (BTC) options climbed 16.6% to reach $734 million, while Ethereum (ETH) options notched up a notable 60% surge, summing up to $207 million. This general rise in BTC options volume on CME reveals the rising trend among institutions to use options as a hedging mechanism in a climate riddled with financial uncertainties.
The nature of options as derivative contracts essentially provides an investor with the right to purchase or dispose of an underlying asset at a preset cost either on or before a specified time. Crypto options offered by CME, ranging from standard to micro BTC and ETH futures contracts, provide investors with the right to buy or sell one cryptocurrency futures contract at a predefined price at a future date.
However, the market witnessed two primary digital currencies, Bitcoin and Ether, sliding 4% over July, essentially induced by wavering optimism towards the prospective launch of bitcoin-spot ETF, unpredictable regulatory conditions, and malicious DeFi hacks. The doggedly relentless turbulence of these digital currencies nudged investors in the direction of options, facilitating them to defend against directional exposure in the volatile crypto market.
On a different note, the global slowdown noticeably impacted the joint activity in CME BTC and ETH futures. The trading volume of Futures on CME dropped 17.6% to $39.1 billion, while the total derivatives trading volume (futures and options) trimmed 17.0% to $40.1 billion, as per CCData.
The total trading volume of crypto spot and derivatives on centralized exchanges in July registered a 12% shrink to $2.36 trillion, marking the “second-lowest combined volume on centralized exchanges since December 2020,” as documented by CCData. This highlights the undeniable pull and push faced by the crypto market, and the cautious manoeuvring of investors in the midst of such precarious conditions.
Source: Coindesk
