The expiry of Bitcoin (BTC) futures and options this Friday has raised concerns and excitement among merchants as the price has fluctuated without a clear trend in the past 30 days.
There have been moments of euphoria when the price briefly exceeded the $ 10,000 level earlier this month, but lately emotions have turned slightly bearish as the market fell below $ 9,000 on Wednesday night.
Bitcoin (USD) against SP 500 mini futures. Source: TradingView
Correlation does not mean causality
Correlations between cryptocurrency and traditional markets are booming, but now most traders seem to have forgotten that the recent increase in the correlation between Bitcoin and the SP 500 could be at the root of BTC’s current price volatility.
Trying to understand the reasons for this doesn’t do much, although the recent drop in volume on both the cash and futures exchanges certainly makes it easier for algorithmic traders to get their way.
3-day Bitcoin volume – Bitstamp (BTC) and BitMEX (USD thousand). Source: TradingView
This ongoing heated debate over whether Bitcoin futures and options could be the main driver of recent volatility seems somewhat pointless, as there will always be players who trade higher while short sellers are waiting for a price move. Negative.
Open interest can be misleading
After all, the numbers are pretty amazing. Currently, total open interest in BTC futures is over $ 3.8 billion, while open interest in options markets has just reached a record high of $ 1.7 billion.
But the question is, what exactly is behind these numbers?
Bitcoin was associated with volatility. Source: Skew
It’s less than a day before June 26, and Bitcoin’s volatility is at its lowest since the March 12 decline. Low volatility usually indicates that professional traders do not expect large price fluctuations, which lowers premiums on the options markets.
June Bitcoin call options. Source: Deribit
Note that Deribit’s earlier data shows an astonishing number of over 30,000 call option contracts ranging from $ 10,500 to $ 32,000. With less than half a day to expire in June, most are considered worthless at the Deribit brand price.
Nor is there even a single buyer. There are more than $ 300 million in open positions that should not have been considered.
The same applies to the 21,000 put option contracts from $ 8,000 to $ 2,500, which are also considered worthless. This increases Deribit’s open positions by another $ 190 million.
Derivatives lead the option markets, but CME is catching up
Total open interest of Bitcoin options. Source: Skew
Deribit has a total open interest of $ 1.3 billion, followed by the Chicago Mercantile Exchange (CME) with $ 439 million.
June Bitcoin put options. Source: Deribit
There are currently 8,500 (bearish) put options contracts in the money, mostly between $ 8,500 and $ 12,000. A price drop of 15% from the current $ 9,250 to $ 7,865 would only increase the profit of buyers of put options by $ 11 million.
This also assumes that none of them are just hedging positions, which means that the buyer also has a long position elsewhere.
Open interest in the purchase options (contracts) of BTC. Source: CME
95% of CME call options in June are $ 10,500 or more, which is $ 7 or less per contract. Each CME contract represents 5 BTC, so the money contracts amount to $ 250 million of the $ 440 million total open positions in the CME options.
There are currently 830 CME option contracts open, most at $ 8,500 and $ 8,700. A 15% decrease in the CME price would attract USD 5 million to buyers of these contracts, which is not a significant amount.
A relevant part could also be covered here, so that buyers of put options have essentially no advantage.
Both options and futures are trending upwards
Currently, the option markets are not showing any declining strength, at least not for Friday’s expiry. As Cointelegraph reported earlier this week, there are $ 665 million open positions in futures contracts that expire on June 26. These are dominated by bullish indicators of net contango positions and major long / short operators.
Everything points to a neutral or positive market mood for the futures and options maturity of tomorrow. The options and futures for OKEx and Deribit expire on June 26 at 8:00 a.m. (UTC) and the CME a few hours later at 3:00 p.m. (UTC).
The views and opinions expressed here are solely those of author and do not necessarily reflect Cointelegraph’s views. Every step of investment and trading involves risks. You have to do your own research when making a decision.