Before Friday’s $575 million bitcoin option expires, market makers are in “fear mode”


On June 4, there were 15,530 Bitcoins (Bitcoin) The option is about to expire, which is equivalent to an open position of USD 575 million. Currently, the bulls are still severely affected by the 37% BTC price correction in May, which resulted in most call (buy) options under water.

Despite the crash, Bitcoin’s active supply reaches a five-month low, Because 45% of the tokens have not been moved in the past two years. This indicator shows that investors who bought before the 2019 bull market are unwilling to sell at the current price.

Miners are also avoiding sales of less than $40,000 because their outflows have recently reached a seven-month low compared to historical averages.

At the same time, technical analysts pointed out that the 50-week exponential moving average is a strong support level close to $34,000.Nonetheless, the price chart has been forming a sideways trading pattern, eventually forming a wedge shrink and breakout-called “compression”-and show Higher volatility towards the weekend.

Obviously, the market is now mixed, everyone is grasping various signals, trying to determine the direction of the next trend.

With the market downturn, the bear market may dominate

Although shorts could easily dominate the expiration date on Friday, they seem to have become overconfident by focusing mainly on put (sell) options below $32,000.

Aggregate open positions in Bitcoin options. Source: Bybt

The initial situation is favorable for short positions because the call option ratio is 0.84, even though this indicator has the same valuation for every option. However, the right to acquire Bitcoin for $46,000 in less than 42 hours is currently worthless, so the call option is trading at less than $20.

For neutral put put options of $28,000 and below, there is a similar effect. There is no benefit for the holder to extend it in the next few weeks, because these contracts also become worthless. Therefore, in order to better assess the positioning of traders on Friday’s option expiration, we need to pay attention to the range of 32,000-42,000 US dollars.

Neutral call options of up to 42,000 USD total 3,080 Bitcoin contracts, representing an open interest of 114 million USD. On the other hand, put (sell) options as low as $32,000 include 4,680 Bitcoin contracts, which are currently valued at $173 million.

As expected, the $60 million difference in favor of shorts is not enough to cause any interference. This situation is caused by excessively bearish bets that are not rewarded and may cause the first balanced option to expire in three weeks.

Market makers tend to be bearish

The 25% delta skew provides reliable, instant “fear and greed” analysis. This indicator compares similar call (buy) and put (sell) options side by side. When the premium of neutral to put put options is higher than that of similar risk call options, the indicator will turn positive. This situation is generally considered a “fear” scenario, although it is common after a strong rebound.

On the other hand, negative skew means higher upside protection costs and points to bullishness.

Bitcoin 30-day option 25% delta skew.Source: Lavitas

Since May 17, the indicator has repeatedly turned to the “fear” zone and reached a peak of 20%, indicating a lack of interest in providing protective put options.

There is no doubt that the bulls are frightened, but historically, these are the best opportunities to buy on dips.

At least when the rights expire on June 4, short positions no longer dominate the transaction. Huobi, OKEx and Deribit will expire at 8 AM (UTC) on June 4th.

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