As a seasoned financial analyst with extensive experience in cryptocurrency markets, I have closely monitored Bitcoin’s (BTC) price action and derivatives markets. Based on my analysis of the upcoming May 10 $1.35 billion BTC options expiry, I don’t believe that bears have set a trap or anticipated Bitcoin’s recent downtrend.
As a researcher studying Bitcoin’s (BTC) price movements, I often notice that whenever significant corrections occur, the derivatives markets are frequently cited as potential causes. Some analysts and traders argue that bears take advantage of futures contract liquidation levels during these corrections, while others believe that weekly BTC options expiries present opportunities for increased profits.
Lately, there’s been less chatter about such topics due to Bitcoin’s price remaining relatively stable. However, with whispers of a potential trend change resurfacing, it’s worth examining the stance of major players in the Bitcoin derivatives market.
Will the May 10$1.35 billion BTC options expiry bring volatility?
As a market analyst, I’ve observed that Bitcoin’s inability to sustain prices above $65,000 on May 6 has sparked accusations among certain market participants that the weekly options expiry was responsible for the subsequent downtrend. Based on derivatives data, if this theory holds true, we might anticipate additional downward pressure prior to the 8:00 am UTC expiry on May 10.
As a financial analyst, I’ve taken a bird’s-eye view of the significant $1.35 billion Bitcoin options open interest. However, upon closer inspection, the situation appears to be more nuanced. My focus will be on Deribit, which holds an impressive 84% market share for the May 10 options expiry. I’ve excluded the Chicago Mercantile Exchange (CME) from my analysis due to its monthly contracts offering.
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 to consider is the volume discrepancy between these instruments. Generally, increased demand for puts indicates bearish markets.
As a crypto investor, I’ve observed that the ratio of put to call volume for Bitcoin options at Deribit has remained consistently skewed towards calls over the past month. Specifically, the average volume for puts was 0.60 compared to 1.40 for calls during the last 10 days. This indicates a significant difference in trading activity between these two types of instruments. While it’s important to remember that high put-to-call ratios don’t necessarily indicate bearish sentiment, it’s challenging to argue that bears have strategically positioned themselves for a potential Bitcoin price drop below $65,000 on May 6 based on this data alone.
Bitcoin bulls cast overly optimistic bets
When considering call option buyers before the May 10 expiry, it’s crucial to be cautious and not assume every bet is valid due to the limited time remaining, which is less than 13 hours. It’s challenging to rationalize buying Bitcoin at prices like $74,000 or $90,000 within this short timeframe. Consequently, it’s advisable to exclude such overly optimistic bets from open interest calculations.
Despite a 35% decrease in put-to-call ratio indicating reduced demand for put options, bears face less risk due to the majority of call options being placed at $63,000 and above. The open interest for call options below this price is only $91 million, which implies that approximately 87% of them will have no value on May 10. However, should Bitcoin bulls successfully defend the $64,000 support level, the call options’ open interest will surpass put options by a significant margin of $115 million.
As an analyst, I’ve observed that bears managed to avoid substantial losses if Bitcoin remained above $65,000. However, this doesn’t automatically guarantee them a profitable outcome in the long run. Currently, put options with a strike price at $61,500 or higher hold open interest totaling $104 million, nearly enough to offset potential losses for bears. To secure an optimal advantage of $100 million, bears need Bitcoin’s price to drop below $61,000.
Based on current evidence, it seems that Bitcoin option holders who had betted on a price drop before May 10th did not increase their positions. The demand for put and call options was evenly distributed, and there wasn’t a noticeable advantage in pricing for those anticipating a decline. Consequently, the overall effect on Bitcoin’s price at $62,000 appears to be balanced, indicating no significant price swings were anticipated.
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2024-05-09 23:05