The crypto derivatives market fell but sentiment was low due to a fall in the $3B expiration price

Bitcoin (Bitcoin) Cause the entire cryptocurrency market to experience a period of turbulence Most of the cryptoverse is painted red May 19 is now also known as “Black Wednesday.”

The price of BTC fell below $40,000 for the first time since the price of BTC broke through the resistance level on February 9. Tesla buys $1.5 billion worth of BTC It also announced that it will start Accept Bitcoin as a payment method.

At the time of writing, the price of BTC has rebounded slightly to the $37,000 range, bounced back between $36,000 and $40,000, and failed to break in either direction.

Ironically, the reason for the collapse in the price of this flagship cryptocurrency is that the trigger of the crash was Elon Musk. Concerns about Bitcoin’s energy consumption, And his company Tesla withdrew its acceptance of Bitcoin as payment. Cointelegraph discussed this with the Market Insights team of the cryptocurrency exchange OKEx. A spokesperson described these events in detail, saying that these events were only an incentive to shake up the overheated market:

“Despite continued downward pressure on BTC, we have seen a sharp rise in altcoins, and signs of pessimism are enough for market participants to start selling their assets to lock in profits or reduce losses. High volatility and sudden price shocks also mean Many leveraged long traders have been liquidated, leading to further losses and sharper price drops.”

Another factor that caused the market to collapse is China increases its bet on Bitcoin mining And trading activities. The news is part of the State Council’s comprehensive suppression of securities violations in order to stabilize the stability of the stock, bond and foreign exchange markets in order to maintain the stability of the State Council’s Financial Stability and Development Committee.

Among other affected altcoins, Ether (ETH) (Major altcoin) also had a major impact on its price. ETH hit a record high of $4,362 on May 12, but after baptizing the entire market, the price of the token fell to a 30-day low of $1,922 on May 23, causing the price to fall by 55%. In the subsequent rebound, the price rose by more than 35%, and the transaction price was around US$2,800.

Undoubtedly, due to the absolute advantages of these tokens, both Bitcoin and Ethereum products dominate the field of crypto derivatives. Although asset price discovery is highly dependent on the futures market, unexpected price changes usually bring huge losses to the relevant investors.

The crash caused a lot of liquidation

As the spot price rises, the Bitcoin futures market will see tremendous growth in 2021. The open interest of exchange-traded BTC futures hit a record high of US$27.68 billion on April 13. However, during the market crash, open interest plunged nearly 58%, reaching a 90-day low of $11 billion on May 23.

The OKEx Insights team further elaborated: “Black Wednesday liquidated approximately US$8.61 billion of positions on the derivatives exchange.” As a result, OKI’s OI dropped from US$2.1 billion to US$1.3 billion. The spokesperson added: “As of now, there has been no significant rebound in open positions, indicating a lack of confidence in the market.”

On May 23, the open positions in the BTC options market also experienced a similar decline. It reached a 90-day low of US$6.66 billion, a 55% decrease from the all-time high of US$14.77 billion on March 18. The head of Deribit, a cryptocurrency derivatives exchange, told Cointelegraph:

“The collapse of BTC and ETH led to the implied volatility level, so the option premium rose sharply. The market maker adjusted the price because the actual trading volume was higher than the implied trading volume. Because most large clients use our advanced portfolio margin system Therefore, liquidation is usually not performed at these higher levels. On the contrary, we will use triangular hedging.

Take a look at the Deribit Implied Volatility Index (DVOL) Provide insight into forward-looking volatility. It gives a 30-day annual fluctuation expectation. Strijers further elaborated on how to use DVOL as a pioneer in the market. He said: “DVOL will be a good indicator of the upcoming turbulence. The DVOL started to increase around midnight on Wednesday before the drop.”

The downward trend in the price of BTC can be traced back to May 12, when the price of Bitcoin fell below $50,000. An OKEx Insights spokesperson further commented on this trigger, saying that Musk’s tweets “filled the crypto market with fear” and added: “The premium for quarterly futures has fallen from 3.5% to less than 1%. This indicates futures. The market is very cautious and did not expect prices to rise sharply.”

On the other hand, OKEx Long-short ratioThe token’s retail sentiment indicator has remained high, leading to a sell-off on Black Wednesday. A deviation from the usual trend indicates that prices will move in a direction that is not conducive to retail investors.

Shane Ai, who is responsible for product development of crypto derivatives at Bybit (a cryptocurrency derivatives exchange), explained to Cointelegraph:

“The options market intensified the sell-off, especially when the BTC price fell below the 45,000 area and saw a large number of short sellers liquidating. This resulted in: 1) a sharp surge in IV for all durations; and 2) the entire futures term structure They are all sold at or below the spot level.”

On May 28, nearly $3 billion of options expired

As cryptocurrencies see the long-awaited rebound, Bitcoin and Ethereum briefly broke through $40,000 Respectively on May 26 and $3,000. Maintain a negative level in the subsequent time interval. “

Now, another event is approaching at the end of May, when the main option expires. On Friday, May 28, a total of 53,400 BTC options expired, valued at more than 2.1 billion U.S. dollars, and there were also ETH contracts worth 880 million U.S. dollars.As options valued at nearly $3 billion expire, the data shows Bear dominates this expiry date.

according to data The highest price for BTC options from CoinOptionsTrack to expire is $50,000. The maximum pain price is the price of the option contract with the largest number of losses. The largest open interest came from put options with a strike price of $50,000, followed by put options with a strike price of $40,000. The price may rebound slightly until it expires, but the current market sentiment does not support this move.

Strijers further mentioned: “Many calls will expire in OTM [Out of The Money]; Put options buyers will see that their hedging or speculative put options bring the protection they are looking for. An interesting level to watch may be the 40K level of the 2K open interest. “

Since the price of Bitcoin is currently hovering around $40,000, it will be very interesting to observe the consequences of maturity and the impact on asset prices.As BTC’s volatility recently reached a high in 2021, The price may fluctuate even more.