Bitcoin’s $1.2 billion futures and options contracts just expired: what’s next?

A total of 106,000 Bitcoin futures contracts and options (BTC) expired today, and this makes investors curious about how the BTC price may respond, both before and after the expiration.

Bearishers were not expecting the most recent rally to USD 11,000, especially after two months of sideways trading. The 52% increase in Bitcoin’s aggregate open interest rate rise in July indicates that sellers are overconfident or are using it primarily for hedging and arbitrage opportunities.

Bitcoin futures aggregate open interest

The above data show that total open futures interest is over USD 5.2 billion, only 3% less than its historical peak in mid-February. While this number may seem daunting, the truth is that less than USD 500 million has expired today.

Bitcoin options were a little more worrying, with 32% of the previous day’s open interest expired at $2.1 billion in aggregate. Unlike the futures markets, there isn’t much profit in renewing options on the last few days of trading.

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Options contracts have the mechanics of ‚one winner takes all the market‘, as those underwater are considered useless. As for the $1.4 billion in open interest that didn’t expire today, the big question is how optimistic/downbeaten are those.

Open interest futures do not flinch after 18% gains
The average use of leverage on BitMEX exceeds 20x, which means that a 10% move should be enough to settle 60% of traders due to insufficient margin to cover their risk.

Bitcoin BTC perpetual liquidations

The above graph shows only USD 115 million in purchase settlements on July 27 despite a price increase of 12%, indicating that these sellers had an unusually high margin. This is a bullish indicator, as most future contract sellers appear to be covered.

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Option markets remain bullish
Bitcoin options open interest by expiry

The open interest on Ethereum Code options fell by USD 690 million today, leaving 60% of the remaining USD 1.4 billion as of August and September. More importantly, one must understand the impact on the put/call ratio. This metric provides an excellent indicator of professional traders‘ sentiment.

According to the graph above, the put/call ratio was 63% on July 30, before the due date. This indicates that the open interest of put options (bearish) was 37% smaller than call options (bullish). Preliminary data shows that the indicator is currently at 69%. Despite remaining in bullish territory, the open interest for the remaining calendar shows a little less optimism.

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