Markets
Will markets fall further as $1.5 billion worth of crypto options expire?
Around 18,000 Bitcoin options contracts will expire on July 5 with a nominal value of around $1 billion.
However, this week’s expiration event is much smaller than the large contract expiration at the end of the quarter last Friday.
Bitcoin Options Expiration
The current batch of BTC derivatives has a put/call ratio of 0.65, meaning that almost twice as many long (call) contracts are expiring as short (put) contracts.
The maximum pain point, or level at which further losses will occur, is $61,500, which is significantly higher than current spot prices following this week’s massive market drop.
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 for Deribit. However, bears are gaining strength with OI rising at lower strike prices.
“Right after the quarterly delivery, the market saw huge volatility, with key term IVs (implied volatility) rising significantly, a good opportunity for institutional sellers to build positions,” commented crypto derivatives solutions provider Greeks Live.
“The market mood is more bearish, and the IV of put options on BTC and ETH has increased significantly, and the term structure shows a reversal from very low to almost high.”
Implied volatility is a measure of the future volatility of expiring contracts, which increases during periods of large market movements.
In addition to the expiring Bitcoin options, there are 164,000 Ethereum options set to expire. They 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 down 8.6% on the day to $2.08 trillion. There have been $675 million in liquidations in the past 24 hours, according to for Glassnode.
About $350 million has flowed out of the cryptocurrency market since the start of this week, in its biggest decline since early April.
Bitcoin fell 7% in a dip just below $54,000 on July 5 as Mt. Gox ransom transfers began and the German government continues to move BTC. The asset fell through monthly support to 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 getting obliterated as usual, with many dropping double digits on Friday.