Have bitcoin and ether finally turned a corner? It’s looking that way, if crypto options traders are anything to go by.

The volume of bitcoin options traded on Deribit, one of the leading exchanges for crypto-focused derivatives products, jumped 82% in January versus December, according to crypto market maker OrBit Markets. Ether options swelled 38%.

More investors are positioning for price gains, with the volume skewed to bullish call options — paying a premium for an option to buy bitcoin or ether at a future date and agreed price — rather than the conversely bearish put options to sell.

Calls commanded 71.1% of total bitcoin futures open interest, and 77.5% for ether, according to Deribit data.

“You’ve actually seen a couple people trading in US$50 000 calls, for example, that’s been the general appetite that we’ve seen — just increased appetite for upside,” said Chinedu Ume-Ezeoke, quantitative research analyst at data firm Laevitas.

Yet the surge in volumes also indicates investors are in two minds about the direction of crypto markets, preferring low-risk, low-reward options to actually buying bitcoin or ether.

The surge in the options markets, after months of tame trading and depressed volatility, coincides with a 40% leap in the price of bitcoin in January — its best month since October 2021 — and a 32% jump for ether.

“Bitcoin’s rally was explosive, almost like imagining the release of a beach ball that had been forced underwater,” said Joe Ziolkowski, the CEO of Relm, a digital asset insurer.

Renewed demand

Total bitcoin futures open interest — which measures the number of contracts yet to be settled — across all expiries was 293 000 on 27 January, the highest since November, while the put-to-call ratio was 0.42, the lowest in at least a year, according to Laevitas data, indicating traders were favouring calls over puts.

“This is driven by renewed investors demand for call options as they expect spot momentum to continue higher,” said Pulkit Goyal, vice president of trading at OrBit Markets.

The trend in futures may not necessarily be bullish for bitcoin or ether, though, as investors also use these derivatives as hedges against falls in their other investments.

“People are interested in the upside potential of bitcoin and ether, but also concerned about a potential pullback after the massive run-up in prices,” said CK Zheng, founder of crypto derivatives-focused hedge fund ZX Squared. “On both sides of the equation, people are trying to get some protection.”

Read: Bitcoin flirts with ‘golden cross’

The macroeconomic backdrop of a potential US recession or that of further interest rate tightening by the US Federal Reserve is just one among several factors that could derail the latest rally.

After US jobs data came in better than expected last week, markets are betting that the Fed may hike interest rates further than initially expected, which could douse demand for riskier assets such as cryptocurrencies.

Read: Where bitcoin is headed in 2023

“We’re probably not out of the woods yet,” said Ume-Ezeoke at Laevitas. “In the short term, a lot of people are anticipating some sort of correction.” — Vidya Ranganathan, Lisa Pauline Mattackal and Medha Singh, (c) 2023 Bloomberg LP