TL;DR
- A significant number of options contracts linked to Bitcoin and Ethereum expired, including 987,000 ETH options contracts and 96,172 BTC standard options contracts. This coincided with geopolitical tensions and outflows from Bitcoin ETFs.
- The expiration is one of the largest in the exchange’s history, with Bitcoin options accounting for $9.5 billion or 62% of the total notional open interest due for settlement. The expiry wiped out 40% and 43% of Bitcoin and Ether’s total notional open interest across maturities.
- There has been a substantial net outflow of $218 million from US Bitcoin spot ETFs as of April 25, 2024, indicating a cautious or bearish attitude among investors, possibly bracing for price corrections after expiration.
On April 26, 2024, options contracts that were linked to Bitcoin or Ethereum tokens became worthless. This included a total of 987,000 ETH options contracts and 96,172 BTC standard options contracts which expired on that day.
The expiration coincided with geopolitical tensions and outflows from Bitcoin Exchange-traded funds (ETFs), leading to potential market volatility and price swings. Analysts have cautioned traders about the possible impact on market dynamics and pricing for these digital assets.
According to Deribit, the world’s leading cryptocurrency options exchange, BTC’s put-to-call ratio remained at 0.68. This indicates that traders were selling more calls (long contracts) than puts (short contracts). The maximum pain point, the price at which the asset will cause financial losses to the largest number of holders, stood at $61,000 for BTC. However, Bitcoin surged to $64,600 at the moment of the expiration.
For Ethereum, things looked slightly different because its put/call ratio was at 0.51 with $3,100 serving as the maximum pain point. Even though it expired, there was very little price volatility because Bitcoin was trading between $64,200 and $64,600 which is a small range.
Investment Strategies for Bitcoin and Ethereum
The expiration is one of the largest in the exchange’s history, with Bitcoin options accounting for $9.5 billion or 62% of the total notional open interest due for settlement. Ether options comprised the rest. The expiry wiped out 40% and 43% of Bitcoin and Ether’s total notional open interest across maturities.
Adding to the complexity of the market forecast are the dynamics of spot Bitcoin exchange-traded funds (ETFs). As per SoSo Value’s data, there has been a substantial net outflow of $218 million from US Bitcoin spot ETFs as of April 25, 2024.
Major funds such as Grayscale’s GBTC, Fidelity’s FBTC, and Valkyrie’s BRRR have seen significant withdrawals. In contrast, Franklin Templeton’s EZBC stood out with a net inflow of $1.87 million. Notably, BlackRock’s IBIT has not recorded any inflows during the reporting period, marking two consecutive days without inflows.
The movements of these ETFs are crucial as they mirror investor sentiment and market liquidity. These factors can either mitigate the effects of options expirations or intensify price fluctuations. The net outflows indicate a cautious or bearish attitude among investors, possibly bracing for price corrections after expiration.
In conclusion, the expiration of such a large volume of Bitcoin and Ethereum options contracts could breed bullish price volatility, according to observers. Traders are advised to exercise caution and vigilance in the face of these market dynamics.
