Ether overtakes Bitcoin in options market for the first time ever

Ether, the native token of Ethereum’s blockchain, currently on the verge of switching its consensus mechanism from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS), has overtaken the industry leader, bitcoin, in the options market for the first time on record.

The cumulative dollar value of ether options contracts open on Deribit, one of the world’s largest crypto options trading exchanges, stands at $5.7 billion, representing 32% of the total contracts. This is higher than the $4.3 billion locked in open bitcoin options trades. Deribit is the world’s largest crypto options exchange, accounting for over 90% of the global total trading volume and open interest.

Open options trades or open interest refers to the number of options contracts (call and put) traded but not squared off with an offsetting position. The notional open interest is calculated by multiplying the number of contracts open with the going spot market price of the underlying asset.

What you should know

• Ether’s historic first lead over bitcoin in the options market comes as traders pile into ETH calls or bullish bets in the hope that Ethereum’s impending merge would cause a 90% reduction in ETH issuance and bring a store of value appeal to the cryptocurrency.
• The Merge, likely to happen in September, will combine Ethereum’s current proof-of-work blockchain with a proof-of-stake blockchain called the Beacon Chain, which has been running since 2020.
• The increased demand for calls is evident from the sliding put-call open interest ratio, a measure of the number of open put positions relative to open call positions. Call options offer insurance against bullish moves, while put options offer protection against price drops.
• Activity in the ether spot market has picked up too, with the cryptocurrency recently toppling bitcoin as the most traded coin on the Nasdaq-listed crypto exchange Coinbase (COIN).
• While the ether trading volume accounted for 33.4% of the total turnover registered in the week ended July 29, the bitcoin trading volume accounted for 32%, with SOL in distant third place.
• In terms of market valuation, ether, which has a market valuation of $204 billion, is still half the size of bitcoin, whose market cap stands at $446 billion as of the time of this writing.

Ether continues to play second-fiddle to bitcoin in terms of daily trading volume in futures and options markets and open interest in the futures market. However, some analysts are confident that ether will soon replace bitcoin as the world’s largest cryptocurrency by market value.