The market is getting heated this week with 61.3K BTC options set to expire on Friday. This factor suggests something big is brewing with BTC price.
There has been an explosion of BTC options. After a short dip towards the end of January, Bitcoin options have been reaching record levels in February. For most of February, open interest has been reaching $1.5B daily. On Friday 19th, for the first time, Deribit exchanges for the first time confirmed over $1B open interest.
By far, on Monday 22nd, it marked the most saturated day in the Bitcoin futures market by trading $135B. Binance exchange led with this reaching over $44B, Huobi and OKEx generated $36B and $22B respectively. This numbers indicated considerable interest in derivatives and a big sign that a significant price move is on the horizon.
Skew data of Bitcoin options expiring this Friday show that 4,400 have a strike price of $48,000. The second-highest strike price is $40,000 with 3,900 options open. The total Bitcoin options open interest $3B plus notional according to Skew.
$3bln+ notional in total pic.twitter.com/XhCaZBlGos
— skew (@skewdotcom) February 22, 2021
BTC Options Investor Advantages
Open interest represents Bitcoin futures not closed by either the buyer or seller. Bitcoin futures have been a preferred way for some investors to get exposure to Bitcoin. Investors can speculate the price movement of the digital asset without having to own the digital asset itself. Some of the benefits of this approach include, investors are not concerned about having a Bitcoin wallet or concerned over its security. Additionally, there is less concern about regulation as the exchanges offering them are regulated by the Commodity Futures Trading Commission (CFTC).
In the past, Bitcoin open options have affected Bitcoin’s actual price. With 63.1K Bitcoin options set to expire on Friday and most investors speculating a drop to $48K, Bitcoin is already bleeding. At the time of press, Bitcoin is trading around $49K as bulls and bears tassel over the $50K pivotal position. Since reaching the current high of $57K, the market paused with the upcoming seemingly triggering a reaction. Depending on what price Bitcoin close the week, the open interest is set to see some investors liquidated.
Though options do not directly affect prices, their influence is undeniable. The week will experience a high level of volatility especially now that the price has dropped to the $50K region. The range now seems set between $48K and $57K with trading volume hugely impacting how fast prices move from a bear to bull trend and vice versa. Analysts have been quick to advise holders not to panic and to sell during the dips as whales will be quick to take their stack.
Kiguru is a fine writer with a preference for innovation, finance, and the convergence of the two. A firm adherent to the groundbreaking capability of cryptographic forms of money and the blockchain. When not in his office, he is tuned in to Nas, Eminem, and The Beatles.
