The interesting thing about the expiration of this particular option is that the current maximum expiry price is $ 54,000, which is very close to the current trading price. The painful cap is the price at which most options become worthless and result in the option owners losing their premium. Although the alternative book in this case could win.
More than $ 4.2 billion bitcoin options (BTC) contracts expire on April 29. This expiration came after Bitcoin recovered from $ 48,000 to its current level of $ 54,000. The total open interest in Bitcoin options is currently $ 13.54 billion, of which more than 88% comes from Deribit, the largest crypto derivative exchange by volume and market value.
Cointelegraph discussed this with Robby Liu, market analyst at OKEx Insights, a research group at the OKEx cryptocurrency exchange. “The major exit does not in itself indicate that the market is bullish or bearish, but rather limits prices when the previous quarter options expire at the end of March. After the birth, the downward pressure eased,” he stated.
If you look at the curve of maximum pain, it turns out that it is completely flat on the bottom. This means that the total economic impact of the $ 48,000 expiration is relatively comparable to the $ 62,000 expiration. “After the expiration date, with the maximum pain point removed, this could lead to a slight deviation from the 54000 level,” Sean Fernando, Head of Risk and Product Strategy at Deribit told Cointelegraph.
According to CoinOptionsTrack, the connection to exit ratio is 0.69. The buy-to-buy ratio describes the trading volumes of the put options in relation to the so-called options. The buyer of a put option has the right to sell the underlying asset at a predetermined price on a specified date, while the holder of a put option has the right to purchase an asset at a predetermined price on a specified date. The buy to buy ratio is often used as an indicator of market sentiment. A reading above 1 is a selling indicator and a reading below 1 is considered a buying opportunity. Regarding the importance of the maximum pain theory in this version, Liu explained:
“The current price cap for options that expired on April 30th is $ 54,000, but skewed due to the inability to reach $ 80,000 for the calls with the highest open interest at the moment. The $ 52,000 patents expire and $ 51,000 are worthless.”
Variants of the director’s influence are noted
While monthly expiration dates are often significant events for the underlying asset due to the expiration date, expiration itself is not rare. There are many options with different expiry dates offered by different exchanges. For example, the April 23 expiration resulted in the expiration of 27,000 BTC options. At current prices, the due date was $ 1.45 billion. Most of them were around 2,500 put options with a buy price of $ 50,000, while the maximum pain price was $ 58,000.
Liu explained that the effect of the April 23 expiration was directly visible in the bitcoin price: “Bitcoin came under strong selling pressure last Friday, and the price was able to drop below $ 50,000 during the option settlement at 4:00 PM HKST [ 8:00:00 UTC]. Then there was a rebound after that. We don’t know yet if the same scenario will repeat itself. ”
While this effect is often seen in the short term, some investors believe this could be an overestimated angle of analysis. Scott Melker, cryptocurrency trader and analyst, told Cointelegraph:
“There has been a lot of controversy about the effect of expiring BTC options and their impact on the market. Options are part of the entire market and are not logically likely to have a significant effect on the spot price, but this has not stopped traders and investors from suppressing poetic prices and their ‘maximum’ Pain “before the end of the week at the end of each month.”
Ki Yong Joo, CEO of CryptoQuant Crypto Analytics, told Cointelegraph, “The Bitcoin options market is still relatively young, and its duration has a huge impact on the spot price.”
As the debate continues over the long-term impact of the bitcoin options market on the price of BTC, an interesting aspect emerges in analyzing the price dynamics of the underlying asset.
Price dynamics in April are lower than normal.
Although Bitcoin consistently reached its high of $ 64,900 on April 21, it fell by 27% almost immediately when the price fell to $ 46,000. Since then, the main cryptocurrency has recovered from this contraction.