Whenever Bitcoin (BTC)’s price action shows a significant correction, analysts and traders are quick to look for the reason, often in the derivatives market where bears are expected to take advantage of futures contract liquidation levels or take advantage of weekly BTC options expiration. Point your finger at .
Such talk has been on the wane thanks to Bitcoin’s recent range-bound price movements, but now that there are calls for a trend reversal again, let’s take a look at how the whales are positioned using the Bitcoin derivatives market.
Will the expiration of $1.35 billion BTC options on May 10 bring volatility?
The recent failure to hold the price above $65,000 on May 6 is an example of how some market participants are blaming weekly option expirations for the recent downtrend. If this is the case, which can be inferred from BTC derivative indicators, further downward pressure can be expected ahead of expiration on May 10th at 8:00 AM (UTC).
From a top-down perspective, $1.35 billion in options open interest appears to be enough to justify the efforts of Bitcoin bears. But a closer analysis reveals a different scenario. Deribit holds an 84% market share at the options expiration date of May 10, so data is primarily drawn from that exchange. The Chicago Mercantile Exchange (CME) is excluded from the analysis as it only offers monthly contracts.
It is worth noting that call (buy) and put (sell) options do not always coincide when stacked on top of each other. This is a common feature of these instruments, regardless of the underlying asset. Therefore, the first relationship to consider is the volume mismatch between these instruments. Typically, increased demand for put options means the market is bearish.
Deribit’s average BTC options put-to-call volume over the last 10 days was 0.60. This means that puts had 40% lower volume than the standard call options of the past. month. In essence, it is difficult to justify that the bears set some kind of trap or anticipated that Bitcoin would not hold $65,000 on May 6th.
Bitcoin bulls are making overly optimistic bets.
However, not all call option buyers should be taken at face value. Especially considering that there are less than 13 hours left until the actual expiration date of May 10th. For example, you can earn $74,000 in Bitcoin, or $74,000, or even $90,000 in such a short period of time. Therefore, overly optimistic bets should not be considered when measuring open interest.
Even though the put-call ratio shows demand for puts to be 35% lower, the risk of weakness is less since most calls were placed above $63,000. In fact, open interest on call options below this level is $91 million. This means 87% of them will be worthless on May 10th. However, if the Bitcoin bulls regain the $64,000 support, open interest on call options will exceed open interest. $115 million worth of equipment was invested.
Related: Factors Pointing to Long-Term Success for BTC Despite Bitcoin Price Volatility
The bears may have been able to avoid significant losses if Bitcoin had stayed above $65,000, but that doesn’t necessarily mean they will eventually come out ahead. Puts above $61,500 are enough to balance the equation, with total outstanding interest at $104 million. In the best-case scenario for a downtrend, Bitcoin would need to go below $61,000 to secure a $100 million advantage.
There is no indication that Bitcoin bears have placed additional bets using BTC options to profit from the price crash before the May 10 expiration. There was no unusual demand between puts and calls, and there was no specific price level that would benefit a downtrend significantly. Whichever strategy is used, the result is a clearly balanced impact of $62,000, suggesting that no price surprises are expected.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.