45% of BTC options expire in 2 weeks and BTC open interest reaches $8.8B

From the past two months, the open interest for Bitcoin remains constant even when the figure rose by 118% to reach $8.4 billion as a new all-time high. As a result of Bitcoin’s price appreciation and the rising BTC open interest, options have resulted in a $3.8 billion expiry for Jan. 29. 

To analyze the impact of such a large expiry, investors must compare the expiry with the spot exchange volume. Some data aggregators present nearly $50 billion to $100 billion as daily Bitcoin volume. But, a 2019 report by Bitwise Asset Management figured out that exchanges use various questionable techniques to inflate trading volumes. Hence while analyzing the exchange volume, investors should source the figure from trusted data aggregators rather than depending on the data provided by the large exchanges.

As you can see from the above analytics, BTC’s spot volume at exchanges on an average is $12 billion over the past 30 days which is a 215% increase since the previous month. Hence, it displays that the upcoming $3.8 billion expiry translates to 35% of spot BTC daily average volume.

45% of all BTC options will perish on January 29

Most of the cryptocurrency exchanges have monthly expiries. Some of them also hold weekly options for short-term contracts. On Dec. 25, 2020, the largest expiry was recorded where $2.4 billion contracts expired. It is 31% of all open interest. 

As per the information from Genesis Volatility, Deribit’s expiry calendar holds 94,060 BTC as of Jan 29. It relates to 45% of its contracts that will expire in twelve days. The effect is similar to other exchanges as well although Deribit has an 85% overall market share. Not every option will trade at expiry. It is because there are less than two weeks left and some of them are unreasonable.

The bullish $46,000 call options are now worthless and the same holds good with the options below $28,000. It is because 68% are now effectively worthless. Hence, it means that only 39% of the $3.8 billion set to expire on Jan. 29 are worth discovering.

Open interest data is the data from trades that have passed. The skew indicator monitors options in real-time. As BTC price was trading below $25,000 thirty days aga, this gauge is even more relevant. Hence, the open interest at that level does not represent bearishness. 

Market Makers are stepping back in taking upside risks

Among the options, the 30% to 20% delta skew is the single most relevant gauge. This gauge compares call (buy) and put (sell) options simultaneously. A 10% delta skew represents that the call options are trading at more bearish/neutral put options. Whereas the negative skew indicates a higher cost of downside protection and is a sign that traders are bearish. 

As per the data given above, the last bearish sentiment was observed on Jan 10 when BTC price dropped by 15%. As a result of which  30%-20% delta skew passed 30. When this indicator crosses 20, there is a fear of potential price increase from the market makers and professionals. Hence, it is bullish. 

Although $3.8 billion options expiry is trending, 60% of the options are considered worthless. While the remaining open interest is under control as the recent price hike obliterated most of the bearish options. If the BTC price remains above the $30,000 to $32,000 range, then a growing number of put options will lose their value.

Also Read: People Will Move Towards Bitcoin, Says, Dr. Lawrence H. Summers