Traders seek leverage through BTC options as implied volatility slides to weekly lows

Crypto traders are grabbing bitcoin and ether options positions as the digital asset market cooled over the last week, following a recent rally back above $3 trillion.

BTC open interest (OI) jumped up by about $1 billion, and ether OI increased by nearly $150 million between April 28 and April 30, per Coinglass data.

Meanwhile, bitcoin traded in a tight range between $94,000 and $95,000, a sign of reduced volatility. Indeed, BTC’s 7-day and 30-day implied volatility (IV) dropped to a weekly low. The 7-day index fell from 53% last week to 38% by Wednesday, and the 30-day IV retraced to 43%, down from 50% according to The Block's data page.

Ether’s IV recorded a similar pullback for the same timeframe. 7-day IV reduced from 74% to 61%, and 30-day implied volatility saw a descent from 69% to 63%.  “Traders are snapping up this cheap leverage,” said Dr. Sean Dawson, head of research at Derive.xyz, referring to activity on the platform.

“A staggering 73% of all BTC options premiums are being used to buy calls, with ETH seeing an even higher percentage at 81.8%. The sentiment on Derive is extremely bullish, with calls outnumbering puts by 4x for ETH and 3x for BTC.”

Dawson noted that Derive trading doesn’t necessarily reflect the broader options market. Data from venues like Deribit suggested mixed market sentiment and a normalized delta skew.

“This indicates that while Derive traders are betting heavily on price increases for both BTC and ETH, the broader market is more uncertain”, Dawson wrote in an April 30 note. Nevertheless, Dawson predicted BTC and ETH should maintain current levels throughout May in a worst-case scenario.

Derive’s head of research highlighted an 8% chance of bitcoin revisiting the $80,000 range and a 21% chance of seeing ether below $1,600 by May 30. Bitcoin hovered at $94,900 while ether held $1800 by publishing time, according to The Block’s price page.