In a noteworthy event today, nearly $3 billion in Bitcoin and Ethereum options are set to expire at 08:00 UTC on the Deribit exchange, drawing keen attention from traders and market participants alike. As the expiry approaches, questions loom over whether recent price stabilization is merely a fleeting moment or a prelude to a more significant directional shift in the market.
Market data reveals Bitcoin trading at approximately $66,372, with a notable max pain level around $74,000 and a substantial open interest totaling over $2.53 billion. Concurrently, Ethereum is priced near $1,950, with a notional open interest of about $425 million and a max pain level around $2,100. The implications of these figures suggest that many open positions may profit if prices inch closer to those max pain levels. However, sentiment within the options market displays a more cautious tone.
Despite a rebound from a sharp sell-off last week, key metrics indicate traders are still taking steps to hedge against potential declines. Analysts from Laevitas have pointed out that Bitcoin’s risk reversals, which are essential for gauging sentiment in the derivatives landscape, remain heavily skewed toward puts. They report that the 1-week and 1-month 25-delta risk reversals, while recovering slightly, still reflect a negative sentiment, with values of approximately -13 and -11 vols respectively. This trend indicates a sustained demand for downside protection, as traders appear hesitant about the market’s stability.
The nervous atmosphere in the market heightens in the wake of a dramatic event, where Bitcoin briefly dipped below the $70,000 mark last week, triggering widespread liquidations and causing significant imbalances in derivatives. Analysts at Deribit noted this fluctuation led to one of the most dramatic demand shifts for put options seen in years. They explained that the market experienced cascading liquidations after Bitcoin broke the $70,000 threshold, emphasizing the psychological impact such movements can have on traders, prompting them to remain defensive despite a recovery toward the $67,000 range.
Recently, however, there has been a marginal shift as some traders begin to pivot back toward call options, although the overall sentiment remains fragile. As volatility decreases from prior panic levels, Deribit analysts highlight that the market finds itself at a critical inflection point, suggesting a possible turning point in trader sentiment.
The upcoming expiration of these options, particularly of this magnitude, can impose short-term gravitational effects on market prices, especially when concentrated near specific strike levels. While there are signs of improved short-term positioning, some indicators suggest that institutional traders maintain skepticism regarding the medium-term outlook. Analysts from Greeks.live noted that put options have continued to dominate trading activity today, with over $1 billion in Bitcoin put options traded, accounting for 37% of the total volume. Notably, many of these options fall between the out-of-the-money range of $60,000 and $65,000, reflecting a bearish perspective among institutional players for the near future.
As the settlement of today’s options expiry approaches, it presents the potential to ease market pressure and promote stability. However, there remains a possibility that it could act as a catalyst for renewed volatility as traders navigate the weekend ahead.
