Whenever Bitcoin’s (BTC) price action exhibits significant corrections, analysts and traders are quick to search for a reason, often pointing fingers at derivatives markets where bears allegedly exploit futures contract liquidation levels or anticipate increased profits from weekly BTC options expiries.
Such talk has been on the decline recently, thanks to Bitcoin’s range-bound price action, but now that murmurs of a trend reversal have come back, let’s take a look at how whales are positioned using Bitcoin derivatives markets.
Will the May 10$1.35 billion BTC options expiry bring volatility?
The recent failure to maintain prices above $65,000 on May 6 is an example of how some market participants blame the weekly options expiry for the recent downtrend. If this were the case, which can be inferred by BTC derivatives metrics, further downward pressure could be expected ahead of the 8:00 am UTC expiry on May 10.
From a top-down perspective, the $1.35 billion options open interest seems substantial enough to justify the effort from Bitcoin bears. However, a more detailed analysis reveals a different scenario. Deribit holds an 84% market share for the May 10 options expiry, so data will primarily be extracted from that exchange. Since the Chicago Mercantile Exchange (CME) only offers monthly contracts, it was excluded from the analysis.
It’s worth noting that call (buy) and put (sell) options are not always matched when stacked against each other, a common feature for such instruments regardless of the underlying asset. Thus, the first relationship to consider is the volume discrepancy between these instruments. Generally, increased demand for puts indicates bearish markets.
Deribit BTC options put-to-call volume. Source: Laevitas.ch
Note that the average BTC options put-to-call volume at Deribit stood at 0.60 for the past 10 days, meaning put (sell) instruments had 40% lower volumes compared to call (buy) options, which has been the norm for the past month. In essence, it’s difficult to justify that bears have set some kind of trap or anticipated Bitcoin’s failure to sustain $65,000 on May 6.
Bitcoin bulls cast…
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