Crypto Derivatives Market Prepares for Significant Expiries, Heightened Volatility Ahead
According to the CoinDesk: As discussions around crypto derivatives activity intensify, the upcoming expiry of bitcoin (BTC) options worth $6.68 billion and ether (ETH) options worth $3.5 billion on Deribit, a leading crypto derivatives exchange, is poised to impact market dynamics. Scheduled for Friday at 08:00 UTC, these expiries represent over 40% of the current cumulative open interest of more than $23 billion, potentially triggering increased market volatility.
Large quarterly expiries typically amplify volatility as they coincide with higher trading volumes and the closing or rollover of positions. This phenomenon, known as ‘quadruple witching’ in U.S. stock markets, could further elevate volatility levels.
Luuk Strijers, CEO of Deribit, highlighted, “Over 25% of Deribit’s open interest is expected to expire in-the-money, amounting to over $2.7 billion. The total notional size of the expiry exceeds $10 billion.”
Options on Deribit allow holders the right, but not the obligation, to buy (call) or sell (put) the underlying asset at a predetermined price by a specified date. Each options contract on Deribit represents one BTC or ETH.
The impending expiry comes amid bitcoin’s recent 9% decline this month, briefly dipping below $60,000, and ether’s nearly 10% drop, influenced by factors including miner sales, the impact of German-seized BTC, and upcoming Mt. Gox coin transfers in early July.
Despite short-term bearish sentiment, data from Amberdata indicates that investors show a preference for paying higher premiums on near-term and long-term call options, suggesting optimism for asymmetric upside potential by July 12 for BTC and July 5 for ETH. Additionally, anticipation surrounds the launch of the ETH ETF scheduled for early July.
The crypto market awaits Friday’s expiry on Deribit with cautious optimism, expecting the outcome to shape near-term price movements amidst evolving market conditions.
