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Crypto Derivatives Market Update
Stay informed with the latest updates and trends in the crypto derivatives market. Explore insights, analysis, and future projections in the world of cryptocurrency derivatives.
Discussions about activity in the crypto derivatives market are abuzz once again as significant options expiries loom on the horizon.
Deribit Options Expiry
On Friday at 08:00 UTC, Deribit, a leading crypto derivatives exchange, is set to see bitcoin (BTC) options worth $6.68 billion and ether (ETH) options worth $3.5 billion expiring.
Market Volatility Expectations
The impending expiry represents over 40% of the current cumulative open interest of over $23 billion, potentially triggering a surge in market volatility.
Impact of Expiry on Trading Volumes
Large quarterly expiries often lead to increased volatility, making prices more unpredictable due to higher trading volumes and the closing/rollover of positions.
Quote from Luuk Strijers, CEO of Deribit: “As we approach Friday’s large quarterly expiry, potentially influenced by ‘quadruple witching’ and related volatility in U.S. stock markets, over 25% of Deribit open interest is set to expire in-the-money, equating to over $2.7 billion. The total notional size of the expiry is over $10 billion.”
Options are derivative contracts that give the holder the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date.
A call gives the right to buy, while a put offers the right to sell. On Deribit, one options contract represents one BTC or ETH.
Having more than 25% of open interest set to expire in the money means a significant number of derivative contracts are expected to be profitable for their holders at expirations.
Bitcoin has dropped nearly 9% this month, testing support levels below $60,000, while ether has also experienced a downturn of almost 10%.
Quote from Luuk Strijers on Market Conditions: “The recent price drop was caused by miner sales, some pressure from German-seized BTC, and, of course, the imminent transfer of Mt. Gox coins expected in early July.”
Call-put skews show investors are willing to pay a higher premium for near-term and long-term calls offering asymmetric upside than puts, according to data tracked by Amberdata.
Quote from Luuk Strijers on Trading Sentiment: “While short-term bearish sentiment is evident, traders anticipate a positive shift for bitcoin by July 12 and ETH by July 5, looking at options skew. Trading in the ETH ETF is expected to start in the first week of July.”