Data shows Bitcoin bears dominate Friday’s $2.5B BTC options expiry
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Data shows Bitcoin bears dominate Friday’s $2.5B BTC options expiry

The Bitcoin options market (XBT) has seen a massive increase in volume over the last week, as a large batch of Bitcoin calls (puts) expiring on Friday, May 25th have been put to the market. As of this publication, total volume was estimated at $2.5B, with roughly $1B of that coming from calls.

This week saw the expiration of the year’s first Bitcoin options, and the results were as expected: the “Bitcoin bears” owned the day.  The May puts, which were settled at $2.30 per Bitcoin, were the most heavily traded options, accounting for roughly $400 million of the total $2.65 billion. While the majority of this short interest was cleared as of this morning, more than 30,000 contracts remained in a state of “unpaid” short interest.

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The price of bitcoin (BTC) has fallen about 22% in the past seven days, testing the $31,700 mark for the second time in June. According to some analysts, the most relevant news for negative indicators is that China allegedly broke into ATM bank accounts:

China monitors bank accounts of OTC #bitcoin trading platforms, things are getting serious !!!!

– Lark Davis (@TheCryptoLark) June 21, 2021

But, as Cointelegraph reports, bitcoin’s hash rate, which has fallen by nearly 50% to an eight-month low, may also have played a significant role in the price correction. Even the recent purchase of MicroStrategy for $489 million was not enough to keep the company at $35,000.

This move raised the suspicion that the expiration of options and futures on the 25th. June could be behind this. Finally, $2.5 billion worth of options and another $2 billion worth of futures contracts may be settled this month.

CME futures currently account for nearly half of the open interest in futures, although historically most investors wind down their positions in the final week of trading.

Market makers and arbitrageurs typically take a short position in futures contracts while holding BTC, allowing them to earn a premium over the usual cash trade. Meanwhile, large asset managers like Tudor Investments use long term contracts.

However, there is no benefit to renewing an option contract that is already worthless. Less than five days before the expiration date, the right to buy (call) bitcoin at $44,000 traded at $20.

Total open interest in bitcoin options as of 25. June. Source: Bybt

The first picture is in favor of the bulls, as there are 36% more bear-neutral call contracts (to buy) on the 25. June there.

Related: The expiration of $1.5 billion in Ethereum options on the 25th. June will be a decisive moment

Note that 87% of the call options were placed above $34,000. So if bitcoin stays below this level, only the open interest of those 200 million bullish neutral contracts will participate in the June decline.

Meanwhile, 46% of protection puts were open above $34,000. This equates to $510 million in open interest, providing a significant advantage to neutral and bearish contracts.

The $310 million difference in favor of the bears will decrease by $190 million when bitcoin is released on the 25th. June over $36,000. On the other hand, the Bears could add $140 million in open interest by pushing the price below $32,000. The potential benefit of $450 million is significant and should not be ignored.

It might be wise for bulls to throw in the towel, lick their wounds and possibly open new positions using a front spread with puts that allow for a profit with no initial cost other than margin.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.Yesterday’s expiration of the Bitcoin options market set the stage for an interesting week of trading. A number of bitcoin bears made strong showings, pushing the value of the digital currency down. Analysts noted that the price fall was no surprise, since the options market has been under pressure since the end of the year, with bankers and traders citing the expiration date as the main reason for the drop in trading volumes.. Read more about when was bitcoin at its lowest and let us know what you think.

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