Market Makers in ‘Fear Mode’ Before Friday’s $ 575 Million Bitcoin Options Expiration


On June 4, a total of 15,530 Bitcoin (BTC) options will expire, representing $ 575 million in open interest. Right now, the bulls are still heavily affected by the 37% BTC price correction in May, which has led most of the calls (calls) to be underwater.

Despite the crash, Bitcoin’s active supply hit a five-month low, as 45% of the coins have not been moved in the past two years. This indicator shows that investors who bought until the bull run of 2019 are unwilling to sell at current prices.

Miners are also avoiding sales below $ 40,000, as their outputs recently hit a seven-month low from the historical average.

In the meantime, technical analysts have indicated that the 50-week exponential moving average is a strong support level near $ 34,000. Still, the price chart has formed a sideways trading pattern that culminates in a shrinkage and breakout – known as “squeeze” – and indicating higher volatility towards the end of the week.

What is clear is that the market is a mixed bag right now, and everyone is grabbing various signals to try and determine the direction of the next trend move.

Bears could have dominated as markets collapsed

While the bears could have easily dominated Friday’s expiration, it appears they have grown overconfident by focusing primarily on put options below $ 32,000.

Aggregated Bitcoin options open interest. Source: Bybt

The initial picture favors the bears, as the call-to-put ratio stands at 0.84, although this indicator values ​​each option equally. However, the right to acquire Bitcoin at $ 46,000 in less than 42 hours is currently worthless, so this call option is trading below $ 20 each.

A similar effect is in place for neutral to bearish puts at $ 28,000 and below. Holders have no advantage in renewing it for the next few weeks, as these contracts have also become worthless. Therefore, to better assess how traders are positioned for Friday’s options expiration, one should focus on the range of $ 32,000 to $ 42,000.

Neutral bull calls up to $ 42,000 stand at 3,080 Bitcoin contracts, representing $ 114 million in open interest. On the other hand, put (put) options up to $ 32,000 encompasses 4,680 Bitcoin contracts, with a current value of $ 173 million.

As expected, the $ 60 million difference in favor of bears is not enough to cause any inconvenience. This situation was caused by excessively bearish bets that didn’t pay off, potentially leading to the first balanced options expiration in three weeks.

Market makers are bearish

The 25% delta asymmetry provides a reliable and instantaneous analysis of “fear and greed”. This indicator compares similar call (buy) and put (put) options side by side and will turn positive when the premium of neutral to bearish put options is higher than that of similar risk calls. This is generally seen as a “fear” scenario, although it is common after strong rallies.

On the other hand, a negative bias results in a higher cost of upside protection and indicates an uptrend.

30 Day Bitcoin Options 25% Delta Asymmetry. Source: Laevitas

Since May 17, the indicator has repeatedly moved into the “fear” range and peaked at 20%, signaling a lack of interest in offering protective puts.

There is no doubt that the bulls are scared, but historically these are the best opportunities to buy the downside.

At least for the options expiration on June 4, bears no longer dominate the trade. Huobi, OKEx, and Deribit expirations take place on June 4 at 8:00 UTC.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.


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