Will Markets Tank Further as $1.5B as Crypto Options Expire?

Around 18,000 Bitcoin options contracts will expire on July 5 with a notional value of around $1 billion.

However, this week’s expiry event is much smaller than the big end-of-quarter contract expiry last Friday.

Bitcoin Options Expiry

Today’s batch of BTC derivatives has a put/call ratio of 0.65, meaning that almost twice as many long (call) contracts are expiring as shorts (puts).

The max pain point, or level at which most losses will be made, is $61,500, which is significantly higher than current spot prices following this week’s massive market crash.

There is still a lot of open interest at higher strike prices with $532 million at $90,000 and $665 million in OI at $100,000, according to Deribit. However, the bears are gaining momentum with OI creeping up at lower strike prices.

“Just after the quarterly delivery, the market saw huge volatility, with major term IVs (implied volatility) increasing significantly, a good opportunity for institutional sellers to build positions,” commented crypto derivatives solutions provider Greeks Live.

“The market atmosphere is more pessimistic, and the IV of put options on BTC & ETH has risen significantly, and the term structure shows an inversion of far-low and near-high.”

July 5 Options Data
18,000 BTC options are about to expire with a Put Call Ratio of 0.65, a Maxpain point of $61,500 and a notional value of $1 billion.
164,000 ETH options are due to expire with a Put Call Ratio of 0.36, a Maxpain point of $3,350 and a notional value of $470… pic.twitter.com/uAxOO5gDQ8

— Greeks.live (@GreeksLive) July 5, 2024

Implied volatility is a measure of future volatility from expiring contracts which increases during times of major market movements.

In addition to the expiring Bitcoin options, there are 164,000 Ethereum options due to expire. These have a put/call ratio of 0.36, a max pain point of $3,350, and a notional value of $470 million.

Crypto Market Outlook

Crypto markets have tanked to their lowest levels since late February with total capitalization falling 8.6% on the day to $2.08 trillion. There has been $675 million in liquidations over the past 24 hours, according to Glassnode.

Around $350 million has exited the crypto market since the beginning of this week in its largest decline since early April.

Bitcoin tanked 7% in a fall just below $54,000 on July 5 as Mt. Gox redemption transfers begin and the German government continues to move BTC. The asset has fallen through monthly support to its lowest level since February 26.

Ethereum has fared even worse with a massive 10% dump to $2,850 during Asian trading on Friday. The altcoins were getting obliterated as usual with many dropping double digits this Friday.