$1.2B Bitcoin Futures and Options Contracts Just Expired — What’s Next?

A total of 106,000 Bitcoin (BTC) futures contracts and options expired today, and this has investors curious about how BTC price may respond, leading into and after the expiry. 

Bears were not expecting the most recent run to $11,000, especially after two months of sideways trading activity.The 52% increase in Bitcoin futures’ aggregate open interest increase in July indicates that sellers are either excessively confident or mostly using it for hedge and arbitrage opportunities.

Bitcoin futures aggregate open interest

Bitcoin futures aggregate open interest. Source: Skew

The above data shows total futures open interest surpassing $5.2 billion, just 3% shy to its historical high in mid-February. Although this number might seem daunting, the truth is less than $500 million expired today. 

Bitcoin options were a bit more worrisome as 32% of the previous day $2.1 billion in aggregate open interest expired. Unlike futures markets, there is not much benefit in rolling over options over the last trading days.

Options contracts are a winner takes it all market, as those heavily underwater are deemed worthless. As for the $1.4 billion in open interest that did not expire today, the big question is figuring out how bullish/bearish positioned are those.

Futures open interest unfazed after 18% gains

The average leverage usage on BitMEX surpasses 20x, meaning a 10% move should be enough to liquidate 60% of traders due to insufficient margin covering their risk.

Bitcoin BTC perpetual liquidations

Bitcoin BTC perpetual liquidations. Source: Skew

The above chart depicts a mere $115 million in buy liquidations on July 27 despite a 12% price hike, signaling that those sellers had an unusually high margin. This a bullish indicator indeed, as most of those future contracts sellers seem to be hedged.

Options markets remain bullish

Bitcoin options open interest by expiry

Bitcoin options open interest by expiry. Source: Skew

Bitcoin options open interest reduced by $690 million today, leaving 60% of the remaining  $1.4 billion to August and September. More importantly, one should understand the impact on the put/call ratio. This metric provides an excellent gauge of professional traders sentiment.

Bitcoin options put/call ratio

Bitcoin options put/call ratio. Source: Skew

As per the above chart, the put/call ratio was 63% on July 30, ahead of expiry. This indicates that options (bearish) open interest was 37% smaller than call options (bullish). Preliminary data show that indicator is currently at 69%. Despite remaining in a bullish territory, open interest for the remaining calendar shows slightly less optimism.

The net expiry result will most likely be neutral

Futures markets are naturally more balanced as longs and shorts have equivalent exposure at all times. By monitoring recent perpetual liquidation activity, one can infer that most sellers are fully hedged. Some $500 million expired today, and this is less than 10% of aggregated open interest.

Currently, BTC options markets seem to be favoring bulls, and as mentioned earlier, the most recent Bitcoin (BTC) price surge caught many bears off guard. 

Investors should closely monitor options 25% delta skew indicator and futures contracts contango, as previously reported by Cointelegraph. Each of these indicators will signal whether there is potentially excessive bullish activity.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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