Over the past two months, open interest in Bitcoin options has remained fairly stable, although the number increased 118% to $ 8.4 billion as the price of BTC rose to a new record high. The increase in Bitcoin and the increase in open interest in BTC options resulted in the expiration of the historic $ 3.8 billion on January 29.
To understand the potential impact of such a large outflow, investors should compare it with the volumes seen on spot exchanges. While some data aggregators offer a daily bitcoin volume of between $ 50 billion and $ 100 billion dollars, a 2019 Bitwise Asset Management report found that many exchanges use various dubious technologies to increase trading volumes.
This is why it is better to get figures from reliable data collectors when analyzing trading volumes than to rely on data provided by the largest stock exchanges.
As the data above shows, the average BTC spot volume on stock exchanges in the last 30 days has reached $ 12 billion, up 215% from last month. This means that the next maturity of 3.8 billion dollars corresponds to 35% of the average daily Bitcoin volume.
45% of all Bitcoin options expire on January 29
Stock exchanges offer a monthly expiration date, although some also provide weekly opportunities for short-term contracts. December 25, 2020 was the longest expiration date for option contracts of $ 2.4 billion. This figure represents 31% of all open interest rates and shows how options are usually distributed throughout the year.
Genesis Volatility data shows that the Deribit expiration calendar for January 29 contains 94,060 BTC. This unusual focus results in 45% of contracts expiring in twelve days. A similar effect persists on other exchanges, even though Deribit’s total market share is 85%.
It is worth noting that not all options will trade after the expiration, because some of these strikes now seem irrational, especially with less than two weeks left.
Bearish options of $ 46,000 and above are useless, and the same has happened with options below $ 28,000, as 68% of them are virtually useless now. This means that only 39% of the $ 3.8 billion that expires on January 29 is worth exploring.
Open interest analysis provides data on already completed trades, and the deviation indicator monitors options in real time. This figure is more relevant when BTC traded for less than $ 25,000 thirty days ago. Therefore, open interest near this level does not indicate a downward trend.
Market makers are not ready to take growth risk
When analyzing alternatives, the most appropriate calculation is a delta deviation of 30% to 20%. This indicator compares buy (buy) and sell (sell) options side by side.
A delta deviation of 10% indicates that the call options are traded at a premium over the more bearish / neutral put options. On the other hand, negative deviations mean higher costs for fall protection and indicate that traders are moving downwards.
According to the data above, bearish sentiment was last seen on January 10, when the price of bitcoin fell 15%. This was followed by a period of strong optimism, when the deviation from 30% to 20% exceeded 30%.
When this indicator crosses the 20 mark, it reflects fears of market manufacturers and specialists about potential price growth and is therefore considered optimistic.
While the $ 3.8 billion expiration of options is a setback, almost 60% of options are actually considered worthless. In terms of remaining open interest, the bulls control the market mainly because the recent rise in prices to new all-time highs wiped out most of the bearish options. As the expiration approaches, more and more put options will lose value if the BTC stays above $ 30,000 to $ 32,000.