How Will Crypto Markets React to the Massive $4.7B Bitcoin Options Expiring Today?

Crypto markets are down slightly this week as sentiment dampens following last week’s US Securities and Exchange Commission approval of Ethereum exchange-traded funds.

However, volatility could increase when about $4.7 billion in notional value Bitcoin options contracts expire on May 31.

The 69,200 contract expiration is huge compared to last week’s event, as month-end derivatives activity tends to be, according to Deribit.

Expiration of Bitcoin Options

The put/call ratio for this Bitcoin options tranche is 0.61. This means that there are more calls (or long contracts) expiring than puts (or shorts). The point where most losses will occur, called the peak pain point, is around $65,000, which is $3,500 lower than current spot prices.

There is a lot of open interest, or contracts that have not yet expired, in the long positions, including strike prices of 70,000, 75,000, 80,000 and even 100,000, where the OI is $886 million.

On the short side, the strike price of $60,000 is the most OI of $519 million. This suggests that derivatives traders remain bullish on Bitcoin and expect higher prices.

The total theoretical value of the OI for all outstanding BTC options contracts is $19 billion.

Source: Deribit

In addition to today’s large batch of Bitcoin options, there are about $3.7 billion in notional value Ethereum contracts expiring. The 910,000 contracts have a put/call ratio of 0.84 with long and short sellers more evenly matched than BTC contracts.

Additionally, aggregate open interest in Ethereum futures has remained near all-time highs this week around $17 billion, driven by speculation about the spot ETF’s decision.

Crypto Market Outlook

Spot markets rarely react to options expiration events, but today’s is a big one. Total market capitalization was relatively flat on the day at $2.68 trillion. In fact, crypto markets have moved very little over the past 12 days or so.

Bitcoin rose 1.2% on the day to trade at $68,489 at the time of writing, while Ethereum retreated slightly to $3,751.

Altcoins were mostly in the red, adding to their declines over the past few days, and meme coins were taking an especially big hit.

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