Whenever Bitcoin’s price action exhibits significant corrections, analysts and traders quickly search for a reason, often pointing fingers at derivatives markets where bears allegedly exploit futures contract liquidation levels or anticipate increased profits from weekly BTC options expiries.
BTC Options Expiry and Volatility
The recent failure to maintain prices above $65,000 on May 6 shows how some market participants blame the weekly options expiry for the recent downtrend. If this were the case, which BTC derivatives metrics can infer, further downward pressure could be expected ahead of the 8:00 am UTC expiry on May 10.
From a top-down perspective, the $1.35 billion options open interest seems substantial enough to justify the effort from Bitcoin bears. However, a more detailed analysis reveals a different scenario. Deribit holds an 84% market share for the May 10 options expiry, so data will primarily be extracted from that exchange. Since the Chicago Mercantile Exchange (CME) only offers monthly contracts, it was excluded from the analysis.
According to Cointelegraph, it’s worth noting that call (buy) and put (sell) options are not always matched when stacked against each other, a common feature for such instruments regardless of the underlying asset. Thus, the first relationship is the volume discrepancy between these instruments. Generally, increased demand for puts indicates bearish markets.
Source: Laevitas
Note that the average BTC options put-to-call volume at Deribit stood at 0.60 for the past 10 days, meaning put (sell) instruments had 40% lower volumes than call (buy) options, which has been the norm for the past month. Essentially, it’s difficult to justify that bears have set some kind of trap or anticipated Bitcoin’s failure to sustain $65,000 on May 6.
Bitcoin Bulls’ Optimistic Bets
However, one should not take every call option buyer at face value, especially given that there are less than 13 hours ahead of the actual expiry on May 10. For instance, there is hardly a way to justify a right to buy Bitcoin at $74,000 or even $90,000 quickly. Therefore, one should not account for those overly optimistic bets when measuring the open interest.
Source: Deribit
Even though the put-to-call ratio shows a 35% lower demand for put options, bears are at less risk, as most call instruments were placed at $63,000 and higher. The open interest for call options below this level is $91 million, which means 87% will be worthless on May 10. However, if Bitcoin bulls reestablish the $64,000 support, the open interest for call options will surpass the put instruments by $115 million.
While bears may have avoided significant losses had Bitcoin stayed above $65,000, this doesn’t necessarily mean they will come out ahead in the end. Put options at $61,500 or higher and have a total open interest of $104 million, just enough to balance the equation. The best-case scenario for bears requires a Bitcoin price below $61,000 to secure a $100 million advantage.
There is no indication that Bitcoin bears placed additional bets using BTC options to profit from a price crash ahead of the May 10 expiry. There was no unusual demand between put and call instruments, and there is no specific price level that greatly benefits bears. Whatever strategies were employed, the result is an apparent balanced impact at $62,000, suggesting no expected price surprises.
Bitcoin (BTC) Price
At this time, Bitcoin (BTC) is trading at $63,129, up 3.0%. The trading volume is $26,808,319,528, and the market capitalization is $1,243,408,751,452.
You can also buy Bitcoin (BTC) easily on Bitrue. Bitrue is dedicated to providing safe, convenient, and diversified services to meet all crypto needs, including trading, investing, purchasing, staking, borrowing, and more.
Source: CoinGecko
Impact on Market and Asset Prices
Market Implications
Analysts often scrutinize the derivatives market for clues when Bitcoin experiences significant price fluctuations. Recent downturns in Bitcoin’s price, such as the failure to sustain above $65,000 on May 6, are sometimes attributed to events like weekly options expirations. If such events exert downward pressure on Bitcoin’s price, it can influence market sentiment and increase volatility in the cryptocurrency market.
Asset Price Implications
The recent failure to maintain Bitcoin’s price above $65,000 has prompted speculation about the impact of weekly options expirations. However, a detailed analysis of derivatives metrics suggests a more nuanced picture. While the $1.35 billion options open interest may appear substantial, data primarily sourced from Deribit indicates a discrepancy in volume between put and call options. Despite the lower demand for put options, which typically indicates bearish sentiment, the distribution of call options suggests a level of optimism among traders. This balance between put and call options, particularly around the $62,000 price level, indicates a lack of consensus among traders regarding Bitcoin’s future price direction.
While bears may have sought to profit from a potential price crash before the May 10 expiry, there is no clear evidence of significant bets favoring one direction. The absence of unusual demand between put and call options and the lack of a specific price level greatly benefits bears. As such, no major price surprises are anticipated, indicating relative stability for Bitcoin and potentially other cryptocurrencies in the near term.
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