A total of 106,000 Bitcoin futures and options (BTC) expired today, making investors wonder how the BTC price might react, before and after expiration.
The bears weren’t expecting the last run to $ 11,000, especially after two months of sideways trading activity. The overall increase in open interest of Bitcoin futures contracts 52% increased in July indicates that sellers are either overconfident or using it primarily for hedging and arbitrage opportunities. .
Bitcoin futures pool open interest. Source: Skew
The data above shows that total open interest in futures is over $ 5.2 billion, just 3% below its all-time high in mid-February. While that number may seem daunting, the truth is that less than $ 500 million has expired today.
Bitcoin options were a bit more worrying as 32% of the previous day’s $ 2.1 billion total open interest expired. Unlike futures markets, there isn’t much to roll over options in the last few days of trading.
Option contracts are a winner across the market, as those that are heavily underwater are deemed worthless. As for the $ 1.4 billion in open interest that did not expire today, the big question is how much bullish / bearish it is.
Flawless Futures Open Interest After 18% Gains
Average use of leverage on BitMEX exceeds 20x, meaning that a 10% move should be enough to liquidate 60% of traders due to insufficient margin covering their risk.
Bitcoin BTC perpetual liquidation. Source: Skew
The chart above represents just $ 115 million in buyouts on July 27 despite a 12% price hike, indicating that these sellers had an unusually high margin. This is indeed a bullish indicator, as most of these future contract sellers appear to be covered.
Options markets remain bullish
Bitcoin options open interest upon expiration. Source: Skew
Open interest on Bitcoin options was reduced by $ 690 million today, leaving 60% of the remaining $ 1.4 billion in August and September. Most importantly, you have to understand the impact on the put / call ratio. This metric provides an excellent gauge of sentiment for professional traders.
Ratio put / call des options Bitcoin. Source: Skew
According to the chart above, the put / call ratio was 63% on July 30, before expiration. This indicates that the open option interest (bearish) was 37% lower than the call options (bullish). Preliminary data shows that the indicator is currently at 69%. Although remaining in bullish territory, open interest in the remaining calendar shows a little less optimism.
The net result at expiration will most likely be neutral
Futures markets are naturally more balanced because long and short positions have equal exposure at all times. By monitoring recent perpetual liquidation activity, it can be inferred that most sellers are fully covered. Some $ 500 million expired today, which is less than 10% of overall open interest.
Currently, the BTC options markets seem to favor the bulls, and as previously mentioned, the recent Bitcoin (BTC) price spike has caught many bears off guard.
Investors should closely monitor the 25% option delta bias indicator and futures contango, as previously reported by Cointelegraph. Each of these indicators will signal if there is potentially excessive bullish activity.
The opinions and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You need to do your own research when making a decision.