A total of 106,000 Bitcoin (BTC) futures and contracts expired today, and this makes investors curious as to how the price of BTC can respond, what it entails and after expiration.
The bears weren’t expecting the most recent run to $ 11,000, especially after two months of lateral trading activity. The 52% rise in the aggregate increase in Bitcoin futures open interest in July indicates that sellers are overconfident or use it primarily for hedging and arbitrage opportunities.
Bitcoin futures add open interest. Source: biased
The above data shows that total open futures interest exceeds $ 5.2 billion, just 3% less than its all-time high in mid-February. Although this number may seem daunting, the truth is that less than $ 500 million has expired today.
Bitcoin’s options were slightly more concerning as 32% the day before matured $ 2.1 billion in aggregate open interest. Unlike futures markets, there is not much benefit in renewing options in the last trading days.
Option contracts are a winner that takes the entire market, as those that are underwater are considered useless. As for the $ 1.4 billion in open interest that didn’t expire today, the big question is to find out how bullish / bearish those are.
Futures open interest without flinching after 18% gains
The average use of leverage in BitMEX exceeds 20x, which means that a 10% move should be enough to liquidate 60% of traders due to insufficient margin covering their risk.
Bitcoin BTC perpetual settlements. Source: biased
The chart above shows just $ 115 million in purchase settlements on July 27 despite a 12% price increase, indicating that those sellers had an unusually high margin. This is a bullish indicator, as most future contract sellers appear to be hedged.
Option markets remain bullish
Bitcoin options open interest to maturity. Source: biased
Open interest on Bitcoin options declined by $ 690 million today, leaving 60% of the remaining $ 1.4 billion as of August and September. More importantly, one must understand the impact on the put / call relationship. This metric provides an excellent indicator of sentiment for professional traders.
Bitcoin put / call ratio options. Source: biased
Based on the chart above, the put / call ratio was 63% on July 30, before the expiration date. This indicates that the open interest on options (bearish) was 37% smaller than the call options (bullish). Preliminary data shows that the indicator is currently at 69%. Despite remaining in bullish territory, open interest in the remaining schedule shows slightly less optimism.
Net result to maturity is likely to be neutral
Futures markets are naturally more balanced as longs and shorts have equivalent exposure at all times. By monitoring recent perpetual settlement activity, it can be inferred that most sellers are fully protected. Some $ 500 million expired today, and this is less than 10% of the aggregate open interest.
Currently, the BTC option markets appear to be favoring bulls, and as mentioned above, the most recent Bitcoin (BTC) price surge surprised many bears off guard.
Investors should closely monitor the 25% delta bias options and contango futures contracts, as previously reported by Cointelegraph. Each of these indicators will indicate whether there is potentially excessive bullish activity.
The views and opinions expressed here are solely those of the author and do not necessarily reflect Cointelegraph’s views. Every investment and commercial movement involves risk. You must do your own research when making a decision.