Will Crypto Markets Fall Further When $6.3B Bitcoin Options Expire?

Around 85,500 Bitcoin options contracts will expire on Friday, May 29, with a notional value of roughly $6.3 billion. This event is larger than usual for the end of the month, so it may affect spot markets.

Crypto markets have been in decline all week, with around $120 billion leaving the space as Bitcoin continues to weaken and Ether gets crushed.

Escalation of US military action in the Middle East has pushed investors into panic mode, and the sell-off has accelerated.

Bitcoin Options Expiry

This week’s batch of Bitcoin options contracts has a put/call ratio of 0.85, meaning that sellers of longs and shorts are pretty evenly matched. Max pain is around $75,000, according to Coinglass, which is a little higher than current spot prices, so some could be out of the money on expiry.

Open interest (OI), or the value or number of Bitcoin options contracts yet to expire, remains highest at the $80,000 strike price on Deribit, with $1.7 billion, but short sellers still have $1.2 billion in OI at $60,000. Total BTC options OI across all exchanges has been declining recently, and is at $37.5 billion, according to Coinglass.

Although Bitcoin has fallen to a “very dangerous level,” implied volatility (IV) has not risen significantly, reported derivatives provider Greeks Live on Thursday.

Under these circumstances, today’s expiry appears likely to “significantly alter the current options position structure,” they added.

“The market as a whole is still betting on support, and large investors’ concerns about the risk of a breakout have not increased significantly.”

In addition to today’s batch of Bitcoin options, around 650,000 Ethereum contracts are also expiring, with a notional value of $1.3 billion, max pain at $2,200, and a put/call ratio of 0.77. Total ETH options OI across all exchanges is around $6.9 billion.

This brings the total crypto options expiry notional value to around $7.6 billion, the largest event for many weeks.

Spot Market Outlook

Markets have been falling all week, with total capitalization dipping to $2.55 trillion on Friday morning in Asia, their lowest level since April 13.

BTC managed to recover $73,000 after falling below it twice on Thursday, but its market structure remains weak and further losses look likely.

ETH had reclaimed $2,000 at the time of writing, but also looked very weak and deep in bear market territory.

Crypto could be further pressured by US inflation, which increased at its fastest pace in three years in April as measured by this week’s PCE report.

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