$1.35 Billion Worth Of Bitcoin Options Are Set To Expire This Week

This week's Bitcoin options expiry is in total $1.35 billion, but what impact do you expect it to have on the BTC price?

Source: www.ekoturk.com

When Bitcoin's price action undergoes significant corrections, analysts and traders quickly seek explanations. They often point to the derivatives markets, where bears may allegedly exploit futures contract liquidation levels or await increased profits from the weekly expiration of BTC options. Although this discussion has waned recently due to Bitcoin's range-bound price action, rumors of a trend reversal have sparked renewed interest. Let's explore how whales are monitoring the Bitcoin derivatives markets.

Will This BTC Options Expiry On May 10 Lead To Increased Volatility?

The recent inability to sustain prices above $65,000 on May 6 is cited by some market participants as an example of how the weekly options expiry may have contributed to the recent downtrend. If this were the case, BTC derivatives metrics suggest that further downward pressure could be anticipated leading up to the May 10 expiry at 8:00 am UTC.

Looking at the broader picture, the $1.35 billion options open interest appears significant enough to motivate Bitcoin bears. However, a closer examination reveals a different narrative. Deribit, holding an 84% market share for the May 10 options expiry, serves as the primary data source. The analysis excludes the Chicago Mercantile Exchange (CME) as it only offers monthly contracts.

It's important to note that call (buy) and put (sell) options are not always directly matched, which is a common feature of such instruments regardless of the underlying asset. Therefore, the first aspect to consider is the volume disparity between these instruments. Typically, an increased demand for puts signals bearish sentiment in the markets.

Over the past 10 days, the average BTC options put-to-call volume at Deribit was 0.60, indicating that put (sell) instruments had volumes around 40% lower than call (buy) options. This trend has been consistent over the past month. Essentially, it's challenging to argue that bears have laid any traps or predicted Bitcoin's inability to maintain $65,000 on May 6.

Bitcoin Bulls Are Making Excessively Optimistic Bets

Not every call option buyer should be taken at face value, especially with less than 13 hours remaining until the actual expiry on May 10. For example, it's difficult to justify the right to buy Bitcoin at $74,000 or even $90,000 in such a short timeframe. Therefore, overly optimistic bets shouldn't be factored into measuring the open interest.

Although the put-to-call ratio indicates a 35% lower demand for put options, bears face less risk because most call instruments were placed at $63,000 and above. In fact, the open interest for call options below this level is $91 million, meaning 87% of them will expire worthless on May 10. However, if Bitcoin bulls manage to reestablish the $64,000 support, the open interest for call options will exceed put instruments by $115 million. While bears may have avoided significant losses if Bitcoin remained above $65,000, this doesn't guarantee they will come out ahead. Put options at $61,500 or higher have a total open interest of $104 million, just enough to balance the equation. The best-case scenario for bears necessitates a Bitcoin price below $61,000 to secure a $100 million advantage.

There's no evidence that Bitcoin bears placed additional bets using BTC options to profit from a price crash before the May 10 expiry. There was no unusual demand between put and call instruments, and no specific price level greatly benefits bears. Whatever strategies were employed, the outcome suggests a balanced impact of around $62,000, indicating no unexpected price movements are anticipated.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.