Anticipated Surge in Market Sentiment Following $10 Billion Options Expiry for Bitcoin and Ether

Discussions surrounding the upcoming expiration of BTC and ETH options are gaining traction as the market braces for potential volatility. On the horizon, a substantial amount of options, with BTC valued at $6.68 billion and ETH at $3.5 billion, are set to expire on Deribit, a prominent crypto derivatives exchange.

The impending expiration represents a significant portion, over 40%, of the current total open interest of more than $23 billion. Such large quarterly expirations often lead to heightened market volatility, making prices more unpredictable due to increased trading volumes and position closures or rollovers.

Luuk Strijers, the CEO of Deribit, highlighted that as the market approaches the significant quarterly expiration, influenced by factors like ‘quadruple witching’ and related U.S. stock market volatility, over 25% of Deribit’s open interest is poised to expire profitably, amounting to over $2.7 billion. The overall notional size of the expiration surpasses $10 billion.

Options, derivative contracts that grant the holder the right (but not the obligation) to buy or sell the underlying asset at a predetermined price by a specific date, play a crucial role in market dynamics. With more than a quarter of open interest expected to expire profitably, a substantial number of derivative contracts are anticipated to yield profits for their holders upon expiration.

Despite recent price fluctuations, Bitcoin, the leading cryptocurrency by market capitalization, experienced a nearly 9% decline this month, briefly dipping below $60,000. This downward trend has had a ripple effect across the broader market, causing Ether to drop by almost 10%.

Various factors, including miner sales, pressure from German-seized BTC, and the impending transfer of Mt. Gox coins in early July, have contributed to the recent price drop, according to Strijers.

Furthermore, data from Amberdata reveals that investors are showing a willingness to pay a higher premium for near-term and long-term calls, indicating an optimistic outlook for potential asymmetric upside compared to puts.

Looking ahead, traders are eyeing a positive shift for Bitcoin by July 12 and Ether by July 5, as indicated by options skew. Additionally, trading in the ETH ETF is anticipated to commence in the initial week of July, according to Strijers’ observations.