Whenever Bitcoin’s (BTC) price experiences significant corrections, analysts and traders often speculate about the cause, often pointing to derivatives markets where bears are believed to exploit futures contract liquidation levels or anticipate profits from weekly BTC options expiries.
However, with Bitcoin’s recent range-bound price action, discussions about these factors have decreased. But now that there are murmurs of a trend reversal, let’s examine how whales are positioned in Bitcoin derivatives markets.
Will the $1.35 billion BTC options expiry on May 10 bring volatility?
The failure to maintain prices above $65,000 on May 6 is an example of how some market participants attribute the recent downtrend to the weekly options expiry. If this is the case, based on BTC derivatives metrics, we could expect further downward pressure leading up to the expiry at 8:00 am UTC on May 10.
Looking at the $1.35 billion options open interest from a top-down perspective, it seems significant enough to support the efforts of Bitcoin bears. However, a more detailed analysis reveals a different scenario. Deribit, with an 84% market share, dominates the May 10 options expiry, so data will primarily be extracted from that exchange. The Chicago Mercantile Exchange (CME) was excluded from the analysis because it only offers monthly contracts.
It’s important to note that call (buy) and put (sell) options are not always matched when stacked against each other, which is a common feature for such instruments regardless of the underlying asset. Therefore, the first relationship to consider is the volume discrepancy between these instruments. Generally, increased demand for puts indicates bearish markets.
The average BTC options put-to-call volume at Deribit over the past 10 days was 0.60, meaning put (sell) instruments had 40% lower volumes compared to call (buy) options. This has been the norm for the past month, making it difficult to argue that bears have set a trap or anticipated Bitcoin’s failure to sustain $65,000 on May 6.
However, it’s important to be cautious of every call option buyer, especially given the short time remaining until the expiry on May 10. It’s 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 considered 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 because 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, which means 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 surpass the put instruments by $115 million.
Despite the lower demand for put options, bears are not necessarily in a better position in the long run. Put options at $61,500 or higher have a total open interest of $104 million, which balances the equation. For bears to have an advantage, Bitcoin’s price would need to be below $61,000.
There is no indication that Bitcoin bears have placed additional bets using BTC options to profit from a price crash ahead of the May 10 expiry. There was no unusual demand between put and call instruments, and there is no specific price level that greatly benefits bears. Whatever strategies were employed, the result is an apparent balanced impact at $62,000, suggesting that no price surprises are expected.
Please note that this article does not provide investment advice or recommendations. Every investment and trading move carries risk, and readers should conduct their own research before making decisions.