This Friday they expire $ 1 billion in Bitcoin Options. In this post I will explain the panorama that this event promises.
Future contracts are one of the main instruments to invest in Bitcoins. Although the cryptocurrency is not being purchased directly. However, this Friday has almost finished another month. Which means that the Bitcoin options will expire, which is why we will explain today the importance of this event for the crypto world.
Future contracts are relevant. The market for these financial derivative products is much larger than the direct purchase of crypto assets in existing exchanges.
These are derivative financial instruments. That is, instruments whose purchase does not imply the direct acquisition of the asset on which they depend. That is, the purchase of Bitcoin Contracts does not imply in any case the direct purchase of a BTC.
The great advantage of future contracts is that they allow us to predict the fall in the price of an asset. And therefore make short investments on them. Well, if you have a contract for the sale of Bitcoins for $ 10,000, and the price of Bitcoin falls below 5,000, this means that at the end of the day you will earn money. And therefore, that the contract increased in value for you even if the BTC fell.
Options expire: Volatility?
There are 114,700 options contracts, worth more than $ 1 billion, which expire on June 26 on major futures contract exchanges.
This tends to coincide with a drop in the price of Bitcoin, given the expectations generated by the maturity of these financial products, with the price recovering soon after, generally. However, this time it is not very clear what will happen.
This imminent expiration, which brings together 70% of the positions in the derivatives markets. It is expected to provoke an episode of price volatility. Which, due to the trends observed in the Bitcoin derivatives market in recent weeks, could break with this trend of expiration of future contracts to generate drops in price, and, for this occasion, lead to an increase.
A panorama promises that this time it will give the long-awaited boost to BTC above $ 10,000. In addition, open interest in the digital currency rises to $ 1.3 billion, double what it represented just a couple of months ago, according to data from Bitcoin and Crypto Analytics provider Skew. Another positive sign for the cryptocurrency market.
What will happen?
Taking up the thread of ideas regarding this Friday’s event and remembering that $ 1 billion in options expire, most of the Bitcoin options that expire are bullish bets on the price increase.
As indicated by QCP Capital in a note for clients. “The positions at the end of June are concentrated around $ 10,000 – $ 15,000, with a good part of it probably from an institutional source.”
From this fact, it follows that the money of large investors is betting that Bitcoin raise its price, and the positions that are stacked this June show an increase in the interest of institutional funds.
However, according to data collected by Forbes, the divide between bullish and bearish options is fairly neutral. In fact, global option volumes are only 1% of the total possible future exchanges.
Meanwhile, there is considerable open interest of 4,605 futures contracts expiring in June, which has not yet carried over to July contracts, as noted by Ecoinometrics, a Bitcoin analytics company.
However, most future contracts point to a price higher than the current one, with 75% of the options pointing to a Bitcoin at $ 11,000 or more. Which adds weight to the bullish forecast.
Although some analysts consider that the Bitcoin market is too small to really perceive any notable impact. Bitcoin may become vulnerable to violent price movements in the coming months, if traders transfer short positions on June contracts to July and September maturities. Therefore, you should be aware of the next market movements.