Cryptocurrency News

The cryptocurrency derivatives market is down, but the mood does not deteriorate as the $ 3B expires


Bitcoin (B T c) After led the entire cryptocurrency market through a turbulent period Most cryptovers were painted red On May 19, a day now also known as “Black Wednesday”.

The BTC price fell below $ 40,000 for the first time, as it was behind the news of breaking the resistance level on 9 February. Tesla is buying $ 1.5 billion worth of BTC Also announcing that it will begin Accepting bitcoin as a payment method.

At the time of writing, the BTC price has slightly reversed into the $ 37,000 range, bouncing between $ 36,000 and $ 40,000 and failing to break in any direction.

The irony of this crash in the price of flagship cryptocurrency is that Elon Musk was the trigger for the recession To consider bitcoin’s energy consumption concerns, And his firm, Tesla, withdrew acceptance of bitcoin as payment. Cointegraph discussed it more with the Market Insights team of OKEx, a cryptocurrency exchange. A spokesperson elaborated on these incidents, saying that these were only the triggers to shake up a hot market:

“Although BTC is constantly facing downward pressure, we have seen significant rally in altcoin, and any sign of pessimism was enough for market participants to sell their assets to curb profits or reduce losses . High volatility and sudden price shocks also meant that a lot of leveraged long traders were liquidated, resulting in further losses and a sharp fall in price. “

Another factor that led to the decline in the market was China is opening a front against bitcoin mining And business activities. The news came as part of a general clampdown on illegal activities around securities to maintain the stability of stocks, bonds and foreign exchange markets by the Financial Stability and Development Committee of the State Council.

Many other altcoin were affected, ether (ETH), The dominant altcoin, also made a big hit at its price. ETH reached an all-time high of $ 4,362 on May 12, but after market-wide bloodshed, the token price dropped to a 30-day low of $ 1,922 on May 23, resulting in a 55% drop in value. In the subsequent rebound, the price rose more than 35% to trade in the $ 2,800 range.

Needless to say that both Bitcoin and Ether products dominate the crypto derivatives space due to the prominence of these tokens. While the discovery of the price of an asset is highly dependent on the futures market, unpredictable price movements often cause heavy losses to the investors involved.

Accident caused heavy liquidation

The Bitcoin Futures market has witnessed tremendous growth in 2021 along with an increase in the spot price. Open interest in exchange-traded BTC futures reached an all-time high of $ 27.68 billion on 13 April. But amid market crashes, open interest fell nearly 58% on May 23 to a 90-day low of $ 11 billion.

The OKEx Insights team further elaborated, “On Black Wednesday, a $ 8.61 billion position in the derivatives exchanges was liquidated.” As a result, OI on OKEx fell from $ 2.1 billion to $ 1.3 billion. “As of now, there is no significant rebound showing in open interest, indicating that the market is lacking in confidence,” the spokesperson said.

A similar decline was also observed in the open interest in the BTC options market on 23 May. It reached a 90-day low of $ 6.66 billion, 55% lower than its all-time high of $ 14.77 billion on March 18. Luke Striegers, chief commercial crypto derivatives exchange deribit official told Cointegraph:

“The level of volatility is inherent due to BTC and ETH crashing and thus the option premium has increased massively. Market makers adjusted their prices because the realized volume was higher than the implied volume. As most of the larger customers advanced our Portfolios use a margining system, so liquidation will generally not occur at these higher levels, as we will hedge deltas instead.

A Look at the Derebit Implied Volatility Index (Dvol) Provides insight into forward-looking instability. This gives a 30-day annual expectation of volatility. The Striders further elaborated on how DVOL could be used as a precursor to the markets. He said, “DVOL would have been a good sign of impending unrest. Before the fall around midnight on Wednesday, DVOL started to rise.”

The BTC price drop can be traced back to May 12, when bitcoin was below $ 50,000. A spokesman for OKEx Insights further commented on this trigger, saying that Musk’s tweet “caused a lot of fear in the cryptocurrency market,” adding that the “quarterly futures premium dropped from 3.5% to less than 1%.” Is that the futures market was very cautious and did not expect much of a price rise.

On the other hand, OKEx’s Long-short ratio, An indicator of retail sentiment for tokens, remained very high until the sellout that began on Black Wednesday. This deviation from the general trend suggests that the price will move in a direction unfavorable to retail investors.

Shen Ai, who is responsible for product research and development of crypto derivatives at Bybit – a cryptocurrency derivatives exchange – explained Cointegraph:

“Options markets accelerated the sell-off, especially when BTC prices broke below the 45K zone and saw heavy put seller liquidation. This resulted in 1) a steep rise in IV over all periods; and 2) spotting the entire Future Term structure. Are sold at levels equal to or below.

Nearly $ 3 billion options expire on May 28

As cryptovers see a much awaited rebound, Bitcoin and ether briefly $ 40,000. Exceeded And the $ 3,000 mark on May 26 respectively. AI further spoke on the factor driving it: “The rebound was catalyzed by heavy spot purchase pressure – as seen above the Coinbase premium rise above 7%, as we were in US trading hours – Remaining at negative levels at later intervals between funding rates. “

Now another event is scheduled to take place in late May, a major option termination. A total of 53,400 BTC options expire on Friday, May 28, valued at more than $ 2.1 billion, as well as ETH contracts worth more than $ 880 million. After the expiry of the option, worth about $ 3 billion, the data show that Bears dominate in this expiry.

According to The data From CoinOptionsTrack, the maximum pain value for BTC option termination is $ 50,000. Max Pain Price is the price where the maximum options contracts are at a loss. The largest open interest comes from a put option with a strike price of $ 50,000 followed by a strike price of $ 40,000. There may be a slight correction in prices till the expiry, but the current market sentiment does not support such a move.

Streezers further noted, “Too many calls will end OTM” [Out of The Money]; Put buyers will see that their hedges or speculative puts have brought the protection they were looking for. An interesting level to monitor may be the 40K level with 2K put open interest. “

Since the price of bitcoin is currently around $ 40,000, it would be interesting to see the impact after the expiration and on the price of the asset. As BTC’s volatility has recently reached a high of 2021, There is a possibility that further large fluctuations in prices can be expected.