Latest / The Cryptocurrency Economy with Fexingo: Bitcoin, Ethereum, and Digital Money Markets / Why Bitcoin Options Open Interest Collapsed 40 Percent in June
Transcript
- Lucas: Luna, I have been digging into the options market over the past week, and there is one number that keeps pulling me back in. According to data from Deribit, Bitcoin options open interest dropped by about 40 percent during June 2026. That is not a normal summer lull. Luna: Forty percent is huge. Do we know if that was concentrated in short-dated or longer-dated contracts? Lucas: Good question. It was broad-based — both weekly and monthly tenors saw significant declines. But the most striking part is that this happened while Bitcoin spot price actually ground higher, from around 59,000 at the start of June to nearly 64,000 today. Normally rising price draws in more speculative positioning, not less. Luna: So what is driving the exit? Is it a loss of interest in leveraged plays, or is something structural happening? Lucas: I think it is a mix of both. On the structural side, we have seen a steady migration of capital into spot Bitcoin ETFs, which are essentially buy and hold vehicles. That reduces the need for options-based exposure. On the cyclical side, volatility has been compressing. The VIX equivalent for crypto — the DVOL index — has been hovering around 45 for months, down from peaks above 80 in 2024. When volatility compresses, option sellers still collect premium but buyers find less reason to pay up. Luna: Right, and if you are a market maker, you are also adjusting. Lower open interest means less liquidity, which can create a feedback loop where it becomes harder to hedge, so participants pull back further. Lucas: Exactly. And that is the point where I want to mention something that is not often talked about: this podcast stays ad-free because of listeners who find value in these deep dives. If walking through on-chain data and market structure with us has made something click, you can support the show at buy me a coffee dot com slash fexingo. No pressure at all — but that support is what keeps us independent and focused on these kinds of numbers. Luna: Yeah, completely agree. And it really does make a difference, because we can spend time on a topic like this without worrying about commercial breaks. Lucas: So back to the 40 percent drop. I want to put a finer point on it. Deribit accounts for roughly 85 percent of all crypto options volume. In June 2025, total Bitcoin open interest on Deribit peaked at around 20 billion dollars. By the end of June 2026, that number was closer to 12 billion. A lot of that decline came from the expiry of large positions that were not rolled forward. Luna: And what about Ethereum? Was it similar? Lucas: Similar but less severe. Ethereum open interest dropped about 25 percent over the same period. Part of that is because Ethereum options are less dominant to begin with — the market is only about a third the size of Bitcoin's in notional terms. But it tells a consistent story: traders are not building new positions at the same rate. Luna: One thing I find interesting is that this coincides with a period where the Fed funds rate has been flat at 3.63 percent since June. When rates are stable, the carry trade becomes less attractive. If you were borrowing dollars to buy Bitcoin calls, the cost of carry hasn't changed — but if the expected volatility isn't there, why bother? Lucas: That is a really sharp observation. The flat rate environment removes one of the catalysts for speculative positioning. In 2024, expectations of rate cuts were driving a lot of call buying because traders anticipated a liquidity flood. Now with rates steady and no clear pivot in sight, the options market is reflecting a more cautious stance. Luna: Let me bring up another potential explanation. The crypto correlation with stocks hit a three-year low recently, right? If Bitcoin is no longer trading like a risk asset, maybe the options market is repricing its behavior as a hedge rather than a speculative bet. Lucas: That is a great point. If Bitcoin becomes a decorrelated asset, the natural users of options might shift from levered speculators to institutional hedgers who need to protect a spot position. But those hedgers tend to use smaller, more targeted positions — they are not buying the same volumes of out-of-the-money calls that retail speculators do. So open interest naturally shrinks. Luna: What about the put-call ratio? Did that shift too? Lucas: It did. The 30-day put-call ratio on Deribit went from about 0.35 in May to 0.48 in June. That is still call-skewed, but it suggests more hedging demand relative to speculative upside bets. It supports the idea that the remaining open interest is more about risk management than directional gambling. Luna: So if open interest stays at these lower levels, what does that mean for the broader market? Less leverage usually means less violent liquidations, which could keep volatility low. Lucas: Exactly. Lower open interest reduces the potential for cascading liquidations during a flash crash. In 2025, a 10 percent Bitcoin drop would trigger waves of forced selling in the perpetual futures market. Today, with less leverage in the system, those moves might be more contained. The flip side is that lower options activity also means less hedging flow, so market makers have less incentive to keep the spot price pinned. We could see larger, slower directional moves rather than quick whip-saws. Luna: That actually fits with what we are seeing in spot price action over the last 30 days: a steady grind higher from 59,000 to 64,000, with very few two percent intraday swings. It is almost like the market matured overnight. Lucas: Matured is a strong word, but I think it is heading in that direction. The etf driven inflows have fundamentally changed the composition of Bitcoin ownership. According to the latest 13F filings, institutional holders now account for over 60 percent of ETF shares outstanding. Those holders are not using options to juice returns. They are treating Bitcoin as a long-term portfolio allocation. Luna: Right. And that is a completely different demand profile than the retail trader who was buying weekly 70,000 calls on Deribit. That retail trader is still there, but their footprint has shrunk. Lucas: To give a specific example, in May 2025, there were over 100,000 contracts of open interest on the 80,000 strike call for July 2025 expiry. By June 2026, the highest open interest on a single Bitcoin strike was about 25,000 contracts on the 70,000 strike for August. The absolute numbers are down across the board. Luna: So where does this go from here? Do you think open interest will recover if volatility picks up, or is this a permanent downshift? Lucas: I think some recovery is likely if we see a catalyst — say a Fed rate cut or a major regulatory approval. But the structural trend is toward lower leverage. The era of 100x perpetuals and massive weekly options volumes may not return to the same peaks. The market is growing up, and that means the derivatives market is becoming a smaller part of the overall crypto economy. Luna: It is almost counterintuitive. The asset price goes up, but the activity around it becomes less speculative. That is the opposite of what happened in 2021 and 2024. Lucas: It is, and it reflects a broader maturation. I think we should keep an eye on the Deribit open interest data every month. If it stabilizes around 12 to 13 billion, that is a new baseline. If it keeps dropping below 10 billion, that would signal a deeper shift where even ETF hedgers are stepping back. Luna: Agreed. And I think the key takeaway for listeners is that when you see a headline about Bitcoin at 64,000, do not assume the same speculative frenzy is behind it. The composition of demand has changed. Lucas: Yeah. And that is exactly the kind of nuance that makes following these on-chain derivatives numbers worthwhile. We will track it and report back next month.