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Bitcoin Hits Record Options Open Interest Amid Expectations of Spot ETF Approval

Institutional interest in Bitcoin trading continues to grow as evidenced by record open interest on Bitcoin options. According to recent data, average daily open interest for Bitcoin options on the Chicago Mercantile Exchange (CME) reached an all-time high of $1.9 billion as of December.

Previous Highs Broken

The previous high for CME open interest was $1.68 billion in April, following the U.S. banking crisis, when Bitcoin’s price ascended to $30,000. As of December, Bitcoin’s trading value exceeds $42,000, with market anticipation surrounding the potential approval of a Bitcoin spot exchange-traded fund (ETF).

What is Options Open Interest?

Options are financial derivatives allowing the purchase (calls) or sale (puts) of an asset at a set price in the future. Data from [CoinGlass](https://www.coinglass.com/options) includes global open interest of $19.6 billion, with 64.5% in calls, indicating a short-term bullish sentiment among options traders.

Increased open interest implies a liquid Bitcoin market with substantial activity from sophisticated traders, particularly in the regulated U.S. market as reflected by CME open interest.

Other Key Developments

Binance is now the largest Bitcoin futures exchange after settling with the DOJ and CFTC for $4 billion. The ProShares Bitcoin Strategy ETF (BITO), a U.S. Bitcoin futures ETF, saw assets under management peak at over $1.47 billion, indicating strong institutional interest in Bitcoin.

Markets are pricing in a 66% likelihood of Federal Reserve interest rate cuts in March, considered bullish for Bitcoin, according to the CME Group [FedWatch Tool]. Bitcoin network transaction fees hit record highs due to extensive Ordinals activity, prompting some analysts to recommend buying shares in publicly traded Bitcoin mining companies.

As @WClementeIII notes, record open interest indicates that “institutional confidence in [Bitcoin] as an investment [is] rising”.

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