Markets
Will Markets Drop Another $1.5 Billion When Crypto Options Expiry?
About 18,000 Bitcoin options contracts will expire on July 5 with a notional value of about $1 billion.
However, this week’s expiration event is much smaller than the large end-of-quarter contract expiration last Friday.
Bitcoin Options Expiration
The current batch of BTC derivatives has a put/call ratio of 0.65, meaning that nearly twice as many long (call) contracts expire as short (put) contracts.
The maximum pain point, or the level at which most losses will be incurred, is $61,500, which is significantly higher than current spot prices following this week’s massive stock market crash.
There is still plenty of open interest at higher strike prices with $532 million at $90,000 and $665 million in OI at $100,000, according to at Deribit. However, the bears are gaining ground with the OI climbing to lower strike prices.
“Right after the quarterly delivery, the market saw huge volatility, with major futures IVs (implied volatility) increasing significantly, a good opportunity for institutional sellers to build positions,” crypto derivatives solutions provider Greeks Live commented.
“The market mood is more pessimistic, and the IV of put options on BTC and ETH has increased significantly, and the term structure shows an inversion between the very low and the near high.”
Implied volatility is a measure of the future volatility of expiring contracts, which increases during times of major market movements.
In addition to the expired Bitcoin options, 164,000 Ethereum options are set to expire. These have a put/call ratio of 0.36, a maximum pain point of $3,350, and a notional value of $470 million.
Cryptocurrency Market Outlook
Cryptocurrency markets have fallen to their lowest levels since late February, with total market capitalization falling 8.6% on the day to $2.08 trillion. There have been $675 million in liquidations in the past 24 hours, according to to Glassnode.
About $350 million has left the cryptocurrency market since the start of this week, recording its biggest drop since early April.
Bitcoin fell 7% in a drop just below $54,000 on July 5 as Mt. Gox buyout transfers begin and German government continues move BTCThe asset broke through monthly support to reach its lowest level since February 26.
Ethereum fared even worse with a massive 10% drop to $2,850 during Asian trading on Friday. Altcoins were wiped out as usual, with many dropping by double digits on Friday.