Whenever Bitcoin’s price experiences significant corrections, analysts and traders often speculate about the reasons behind them. One theory is that bears in the derivatives markets take advantage of futures contract liquidation levels or anticipate profits from weekly BTC options expiries. However, with Bitcoin’s price currently range-bound, talk of this nature has diminished. Nevertheless, as murmurs of a trend reversal resurface, it is worth examining how whales are positioned in Bitcoin derivatives markets.
The upcoming May 10 BTC options expiry, which amounts to $1.35 billion, has raised questions about potential volatility. Some market participants attribute the recent downtrend, characterized by the failure to sustain prices above $65,000 on May 6, to the weekly options expiry. If this were true, it could be inferred from BTC derivatives metrics that further downward pressure might be expected leading up to the expiry at 8:00 am UTC on May 10.
Taking a closer look, the $1.35 billion options open interest appears significant enough to support the claims of Bitcoin bears. However, a more detailed analysis reveals a different picture. Deribit, which holds an 84% market share for the May 10 options expiry, is the primary source of data for this analysis. The Chicago Mercantile Exchange (CME), which only offers monthly contracts, has been excluded from the analysis.
It is important to note that call (buy) and put (sell) options are not always balanced against each other, which is a common feature of such instruments regardless of the underlying asset. Therefore, the volume discrepancy between these instruments is the first relationship to consider. In general, increased demand for puts suggests bearish markets.
The average BTC options put-to-call volume on Deribit over the past 10 days has been 0.60, indicating that put instruments had 40% lower volumes compared to call options. This has been the norm for the past month. Based on this data, it is difficult to argue that bears set a trap or anticipated Bitcoin’s failure to sustain $65,000 on May 6.
However, it is important to approach every call option buyer with caution, especially given that there is less than 13 hours remaining until the actual expiry on May 10. For instance, it is hard to justify the right to buy Bitcoin at $74,000 or even $90,000 in such a short period. Therefore, overly optimistic bets should not be taken into account when measuring the open interest.
Although the put-to-call ratio indicates a 35% lower demand for put options, bears are still at less risk since most of the call instruments were placed at $63,000 and higher. In fact, the open interest for call options below this level is $91 million, meaning that 87% of them will be worthless on May 10. However, if Bitcoin bulls manage to reestablish the $64,000 support, the open interest for call options will exceed that of put instruments by $115 million.
While bears may have avoided significant losses if Bitcoin had remained above $65,000, it does not necessarily mean that they will come out on top in the end. Put options at $61,500 or higher have a total open interest of $104 million, which is sufficient to balance the equation. The best-case scenario for bears would require a Bitcoin price below $61,000 to secure a $100 million advantage.
There is no evidence to suggest that Bitcoin bears have placed additional bets using BTC options to profit from a price crash ahead of the May 10 expiry. There has been no abnormal demand between put and call instruments, and no specific price level greatly benefits bears. Regardless of the strategies employed, the result appears to be a balanced impact at $62,000, indicating that no surprises in price are anticipated.
It is important to note that this article does not provide investment advice or recommendations. All investment and trading decisions involve risk, and readers should conduct their own research before making any decisions.