Key Points
- Bitcoin options worth $4.7 billion and Ether options worth $3.5 billion expired on May 31.
- The expiration of these crypto options contracts often leads to price volatility in the cryptocurrency market.
On the last day of May, a substantial number of Bitcoin and Ether options contracts expired. These contracts were valued at $4.7 billion for Bitcoin and $3.5 billion for Ether. The termination of these contracts typically triggers fluctuations in digital currency prices.
Understanding the Put/Call Ratio
The Derbit data revealed that the put/call ratio for the expired Bitcoin (BTC) options stood at 0.61. This indicates that more long contracts expired than shorts. Conversely, the put/call ratio for Ether (ETH) options was 0.46.
The put/call ratio serves as a technical indicator of market sentiment among traders. A ratio below 0.7 denotes strong bullish sentiment, while a ratio above 1 signifies strong bearish sentiment.
Maximum Pain Points
For Bitcoin, the maximum pain point, where leverage traders would incur the most losses, was set at $66,000. For Ether, this point was $3,300. At the time, Bitcoin was trading $2,000 above its pain point at $68,210, while Ether was trading over $400 above its pain point at $3,738.
Millions in open interest (OI) were in long positions with strike prices at $70,000, $75,000, $80,000, and even $100,000. Open interest refers to the total number of unsettled outstanding derivative contracts. Some traders had placed long positions on Bitcoin with a target price of $100,000. With $886 million in open interest at this strike price, the number of long positions seemed significant. The total notional value of all outstanding Bitcoin options contracts was $19 billion.
Market Reaction Post-Spot ETH Approval
The spot Ether ETF approval by the Securities and Exchange Commission (SEC) in May was a significant event for the cryptocurrency market. Ether prices increased by 20% in May in anticipation of the approval. However, the SEC only approved the 19b-4 filing, thus postponing the actual listing for trading.
Following the Ether ETF approval, the cryptocurrency market has exhibited a bearish sideways movement, with Ether stuck below $4,000 and Bitcoin below the $70,000 price barrier. Currently, the market is experiencing a bearish momentum, correcting from the bullish surge of the past two weeks.
