A recent development in the crypto market has seen an institution set up a multi-legged strategy in Derive’s onchain options market, generating a significant notional trading volume of $25 million. This trade is tied to the upcoming U.S. election and has far-reaching consequences for the crypto regulatory space in the world’s largest economy.
Increased Betting and Hedging Ahead of the U.S. Election
As the U.S. election nears, increased betting and hedging tied to the political event are powering notable increases in trading volumes in the crypto market. The election will have significant implications for the crypto regulatory space in the world’s largest economy, making it a major concern for investors and traders alike.
The Institution’s Multi-Legged Strategy
Early this week, the decentralized derivatives exchange Derive saw an institution take a multi-legged bitcoin (BTC) options strategy. The trade is betting on a continued move higher in BTC after the Nov. 5 election. This strategy generated the largest ever onchain options transaction bet tied to the U.S. election, with a notional trading volume of $25 million.
Breakdown of the Institution’s Strategy
The institution acquired 100 call option contracts with a $70,000 strike price set to expire on Nov. 29 while simultaneously writing or selling 200 contracts of the $80,000 call and 100 contracts of the $50,000 put, both expiring on Nov. 29. The institution deposited eBTC, restaked bitcoin created via EtherFi, as collateral, ensuring it earns passive yields on the same.
Understanding the Strategy
The strategy, which looks like a ratio call spread funded by a short put position, will profit most if bitcoin rallies to $80,000 by Nov. 29. The positioning is consistent with options flows on centralized exchanges, which indicate expectations for a post-election rally to $80,000 and higher.
Significance of the Trade
"This $25 million options trade marks a watershed moment for onchain options trading," Nick Forster, co-founder of Derive told CoinDesk in an email. "The institution has strategically positioned a unique structure with sold puts, bought calls, and eBTC collateral, potentially standing to make $1,020,000 on the structure if BTC hits $80,000 by November 29 – excluding any gains from the eBTC collateral."
Implications for Onchain Options Trading
The trade is a prime example of how onchain options offer scalable, non-correlated yield for any onchain asset. Derive is the largest onchain options platform, accounting for 32% of the total DEX options volume of $339 million in the past 24 hours, according to DeFiLlama.
The Onchain Options Market
However, the onchain market is still relatively small compared to Deribit and other centralized platforms, which boast a cumulative 24-hour volume of several billion dollars. Despite this, the recent trade has significant implications for the growth of onchain options trading in the future.
The Institution’s Potential Gains
If BTC hits $80,000 by November 29, the institution stands to make $1,020,000 on the structure, excluding any gains from the eBTC collateral. This potential gain highlights the significance of the trade and its implications for the crypto market.
Conclusion
The institution’s multi-legged strategy in Derive’s onchain options market has generated significant attention and has far-reaching consequences for the crypto regulatory space in the world’s largest economy. As the U.S. election nears, increased betting and hedging tied to the political event are powering notable increases in trading volumes in the crypto market.
Recommendations
Investors and traders should be aware of the potential implications of this trade on the crypto market. The institution’s strategy highlights the significance of onchain options trading and its potential for growth in the future. As the onchain market continues to grow, it is essential to monitor developments in this space.
Key Takeaways
- An institution set up a multi-legged bitcoin (BTC) options strategy in Derive’s onchain options market.
- The trade generated a significant notional trading volume of $25 million and has far-reaching consequences for the crypto regulatory space in the world’s largest economy.
- Increased betting and hedging tied to the U.S. election are powering notable increases in trading volumes in the crypto market.
- The institution acquired 100 call option contracts with a $70,000 strike price set to expire on Nov. 29 while simultaneously writing or selling 200 contracts of the $80,000 call and 100 contracts of the $50,000 put, both expiring on Nov. 29.
- The strategy will profit most if bitcoin rallies to $80,000 by Nov. 29.
- The trade is a prime example of how onchain options offer scalable, non-correlated yield for any onchain asset.
Final Thoughts
The institution’s multi-legged strategy in Derive’s onchain options market has significant implications for the crypto regulatory space in the world’s largest economy. As the U.S. election nears, increased betting and hedging tied to the political event are powering notable increases in trading volumes in the crypto market. It is essential to monitor developments in this space as the onchain market continues to grow.
