This weekend means yet another Bitcoin options expiry event, and while this week’s events are minor, the cryptocurrency market has already been hammered and could fall further.
About 18,000 bitcoin options contracts are set to expire on July 5, with a notional value of about $1 billion.
However, this week’s expiration events are much smaller than last Friday’s large end-of-quarter contract expiration.
Bitcoin options expiration
The put/call ratio for this batch of BTC derivatives today is 0.65, meaning that there are almost twice as many long (call) contracts expiring as there are short (put) contracts.
The maximum pain point, or level of maximum loss, is $61,500, which is significantly higher than the current spot price following this week’s massive market crash.
Deribit data shows that there is still a lot of open interest at higher strike prices, with open interest at $90,000 worth $532 million and open interest at $100,000 worth $665 million. However, as open interest at lower strike prices climbs, shorts are gaining strength.
Greeks Live, a crypto derivatives solutions provider, commented: “Soon after the quarterly delivery, the market saw huge volatility and the IV (implied volatility) of the main tenors rose sharply, which was a good opportunity for institutional sellers to build positions.”
“The market atmosphere is relatively pessimistic, BTCÐ put option IV has risen significantly, and the term structure has shown a reversal of far low and near high.”
Implied volatility is a measure of future volatility of expiring contracts and increases during major market moves.
In addition to the expiring Bitcoin options, there are 164,000 Ethereum options expiring soon. These options 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 level since late February, with total market capitalization down 8.6% on the day to $2.08 trillion. According to Glassnode, $675 million has been liquidated in the past 24 hours.
Some $350 million has exited cryptocurrency markets since the start of the week, marking the biggest drop since early April.
On July 5, Bitcoin plunged 7% to just below $54,000 as Mt. Gox redemption transfers began and the German government continued to transfer BTC. The asset has fallen below monthly support to its lowest level since February 26.
Ethereum fared even worse, plummeting 10% to $2,850 during Asian trading hours on Friday. Altcoins were hammered as usual, with many dropping double digits this Friday.
