Cryptocurrency News

Market Makers Are in ‘Fear Mode’ Ahead of Friday’s $575M Bitcoin Options Expiry


A total of 15,530 bitcoins as of June 4 (B T c) options are ready to expire, representing $575 million in open interest. At the moment, the bulls are still heavily influenced by the 37% BTC price correction in May, and this has caused most call (buy) options to be underwater.

Despite the accident, Bitcoin’s active supply hits five-month low Because 45% of the coins have not been transferred in the last 2 years. This indicator shows that investors who are buying till the 2019 bull run are unwilling to sell at current prices.

Miners are also avoiding selling below $40,000 as their outflows recently hit a seven-month low relative to historical averages.

Meanwhile, technical analysts pointed to the 50-week exponential moving average as a strong support near $34,000. Nevertheless, the price chart is forming a pattern of sideways trading that ends in a narrow wedge and breakout – known as a “compression” – and High volatility signals at the end of the week.

What is clear is that the market is a mixed bag right now, and everyone is interpreting the various signals as an attempt to indicate the direction of the next trending move.

Bears could have dominated the downturn in the markets

While the bears could have easily dominated Friday’s expiry, it seems they have become overconfident, mainly focusing on sub-$32,000 put (sell) options.

Total bitcoin options open interest. Source: Bybt

The opening picture is in favor of the bears with the call-to-put ratio standing at 0.84, although the indicator treats every option the same. However, the right for Bitcoin to gain $46,000 in less than 42 hours is currently worthless, so this call option is trading below $20 each.

A similar effect exists for neutral-to-bearish put options at $28,000 and below. There is no use for the holders to rollover it for the coming weeks as these contracts also become worthless. Therefore, in order to better assess the trader’s position for Friday options expiration, one needs to focus on the $32,000 to $42,000 range.

Neutral-to-bull call options for 3,080 bitcoin contracts amounting to $42,000, representing an open interest of $114 million. On the other hand, the option (sell) has been slashed to $32,000, which includes 4,680 bitcoin contracts, which are currently valued at $173 million.

As expected, the $60 million margin in favor of the bears is not enough to cause any disturbance. This situation was caused by highly bearish bets that did not pay off, potentially leading to the expiration of the first balanced option in three weeks.

Market makers are leaning towards a recession

The 25% delta skew provides a reliable and immediate “fear and greed” analysis. This indicator compares similar call (buy) and put (sell) options side-by-side and will turn positive when the neutral-to-bearish put option premium is higher than that of equal-risk call options. This situation is usually considered a “fear” scenario, although often followed by concrete rallies.

On the other hand, a negative slant translates to a higher cost of upside protection and indicates a bullish trend.

Bitcoin 30-day options 25% delta skew. Source: laevitas.ch

Since May 17, the indicator has flipped into the “fear” range and hit 20% on several occasions, indicating a lack of interest in offering protective puts.

There is no doubt that the bulls are scared, but historically this is the best opportunity to buy a dip.

For at least the expiration of the June 4th option, bears no longer dominate the trade. Huobi, OKEx and Deribit will expire on June 4th at 8:00 AM UTC.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.