Bitcoin
$10 Billion Worth of Bitcoin and Ether Options Set to Expire on Friday
It is again that time when discussions about activity in crypto derivatives take precedence.
On Friday at 08:00 UTC, bitcoin (BTC) options worth $6.68 billion and ether (ETH) Options worth $3.5 billion are set to expire on leading crypto derivatives exchange Deribit.
The imminent expiration, that represents more than 40% of the current accumulated open interest of more than $23 billion could trigger an increase in market volatility. Large quarterly expiries often lead to increased volatility, making prices more unpredictable due to higher trading volumes and closing/rolling of positions.
“As we approach Friday’s big quarterly expiration, potentially influenced by ‘quadruple witchcraft‘ and related volatility in US equity markets, more than 25% of Deribit’s open interest is expected to expire in-the-money, which equates to more than $2.7 billion. The total notional size of the maturity is over $10 billion,” Luuk Strijers, CEO of Deribit, told Coindesk in an interview.
Options are derivative contracts that give the holder the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy, while a put option gives the right to sell. On Deribit, an options contract represents one BTC or ETH.
Having more than 25% of open interest set to expire in the money means that a significant number of derivative contracts are expected to be profitable for their holders upon expiration.
Bitcoin, the leading cryptocurrency by market value, has fallen nearly 9% this month, testing bargain hunters below $60,000 at one point. As usual, the selloff weighed on the broader market, pulling Ether down nearly 10%.
“The recent price drop was caused by miner sales, some pressure from BTC seized by the Germans, and of course the imminent transfer of Mt. Gox coins expected in early July,” said Strijers.
Still, skews in call options show that investors are willing to pay a higher premium for short- and long-term calls that offer asymmetric advantages than puts, according to data monitored by Amberdata.
“While short-term bearish sentiment is evident, traders anticipate a positive move for bitcoin on July 12 and ETH on July 5 by watching for options skew. ETH ETF trading is expected to begin in the first week of July,” noted Strijers. .