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Bitcoin bulls set to defend $13K as $450M in BTC futures expire Friday - Cointelegraph
A total of 62K Bitcoin (BTC) options are set to expire this Friday, and this is equivalent to $830 million in open interest. These massive numbers fail to reflect the fact that 58% of these options are now deemed worthless.
As we approach the expiry date, call (buy) options above the current level begin to depreciate very fast. It is not worth paying $20 for the opportunity to buy BTC at $14.5K on Friday morning. Therefore, rolling options to the next month is not that helpful.
October BTC options pricing. Source: Deribit
With less than 48 hours to October's expiry, call (buy) options above $14.5K and above face slim odds. The same can be said for the $11.5K put (sell) options which are currently trading below $10 apiece.
Deribit leads with a 70% market share of the options that are still worthy. Currently, there are $134 million worth of call (buy) options from $11.5K to $13.5K, stacked against $45.5 million in put (sell) options from $12.5K to $14.5K. Thus, bulls favor bears by a ratio of 3:1.
Chicago Mercantile Exchange (CME) holds a 26% market share among the October BTC options that still count. The call (buy) options near the current market level totals $72 million, whereas the put (sell) is less than $1 million. This movement is not unlike past expiries as CME option traders are usually extremely bullish.
Therefore, there's currently a $160 million imbalance favoring bulls on BTC option markets. This is a relevant number considering the expiry happens at a set time. OKEx and Deribit options and futures are set to expire at 8:00 AM (UTC) on October 30, and the CME a few hours later at 4:00 PM (UTC).
Futures open interest typically falls near expiry
Many traders believe that Bitcoin futures $5.4 billion open interest is also set to expire on Friday. Most of those contracts are either perpetual (inverse swap) or set for a later date.
This time around, CME leads with $360 million open interest for October, but there's a catch. This notional will drastically reduce ahead of expiry as traders move their positions for upcoming months. As proof of this movement, the CME's outstanding October open interest was cut by $130 million yesterday.
No matter how big an investor's win or loss is, rolling over the position for the next expiry is viable. Unlike options markets, futures contracts don't devalue nearing their last trading day.
Futures margin is adjusted daily, meaning, the contract buyer (long) gets paid by the seller (short) when Bitcoin trades up, and the opposite happens if BTC price closes down. Both sides can benefit from rolling over their positions, as long as there's enough margin to maintain it.
For professional traders, futures premium is the most useful indicator to gauge how bullish or bearish those investors are. At the time of writing, OKEx leads the remaining exchanges with $69 million set to expire on Friday, followed by Huobi's $23 million.
This indicator is known as basis, and it usually ranges between a 5% to 15% annualized rate. Whenever the premium is positive, the market is characterized as being in contango. Meanwhile, levels below 5% indicate modest bearishness.
A negative future contracts premium is highly unusual and is usually related to liquidity issues.
As the above chart shows, investors were very bullish in August, as the 1-month futures contract traded with a 25% or higher premium. That was caused by a 30% Bitcoin hike from $9.1K to $11.9K.
The basis indicator currently stands near 14%, on the verge of a very bullish zone. One must factor in that any leveraged bullish position opened in the past six months is currently gaining.
Bitcoin futures aggregate open interest. Source: Skew
Meanwhile, BTC futures open interest more than doubled to $5.4 billion from $2.6 billion back in April. Therefore, it is safe to conclude that investors are well prepared to defend the current $13K support level.
Both derivatives contracts are supporting the market's current strength. Aside from the $160 million options expiry imbalance, futures contract buyers are holding a comfortable position.
Furthermore, as Bitcoin spiked from $11.3K just twelve days ago, short-sellers have been suffering and watching their balances decrease every day.
As for Friday's expiry, some added volatility is to be expected as usual, but as far as the futures premium can tell, it's unlikely that the bears will have a chance to re-establish control of the markets.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
While the United States prepares for the results of the 2020 Presidential Election, a number of data points and traders expect some significant cryptocurrency price fluctuations this week. Statistics from skew.com show bitcoin's 30-day implied volatility has increased to 59% while 3-6 month stats jumped over 62%.
The digital currency economy is hovering at around $388 billion, which is a giant jump from where it was during the last U.S. election in 2016. For instance, during the 2016 presidential race, the price of bitcoin (BTC) was around $709. Since then the crypto-asset BTC has seen a 1,802% return on investment (ROI). Another example is ethereum (ETH), which was trading for $10.83 per unit in 2016, now swaps for $382 in 2020.
For this election, a number of traders and a few points of implied volatility measurements suggest that crypto market participants expect a shake-up this week.
Data from skew.com's "Bitcoin ATM Implied Volatility" chart indicates that the crypto asset's options market expects big price fluctuations. Market players trading traditional finance assets envision a similar market shakeup following the U.S. election. At press time skew.com's chart shows one month implied volatility has spiked and is now hovering around 59% today. Three-month stats have jumped to 62% and 65% for BTC's implied volatility for the six month period.
On Twitter, theskew.comaccount tweeted about the implied volatility andsaid:
It's election day. Options traders are pricing in a little bit of extra premium for this week with a 3.5% bitcoin implied move for the election. Weekly puts are most active today.
A number of other crypto pundits and digital currency market researchers discussed the post-election crypto market on social media channels and forums. After sharing its week 44thinsights report, Arcane Research tweeted out a chart that shows a chart with bitcoin and the S&P 500 during the election week. "Some interesting movements from both bitcoin and S&P 500 during election day in 2016. What will happen this time?" Arcanetweetedon November 3.
"Breathe easy today knowing silver and gold will be every bit as shiny and bitcoin as secure as ever, no matter the outcome of this election," the crypto proponent 'Cryptoredacted' wrote.
On election day, Messari.io's Ty Young also discussed the economic ramifications of the U.S. election and bitcoin. "The majority of polls have Biden holding a 60% chance of winning the presidential election and even higher potential for a blue wave sweep through the senate," Young wrote on Tuesday. "Those outcomes could mean larger stimulus packages, more QE, and clearer guidance for investors going into a new administration."
Young continued:
One thing is probable: volatility is coming. On the bullish side for Bitcoin, central banks will continue to flood the world with money and stimulus packages, further setting the stage for BTC. On the bearish side, a contested election and a second wave of Covid-19 lockdowns could spell disaster for markets, dragging down BTC with it.
Furthermore, the research and trading platform Luno's weekly market report discussed the election on Tuesday as well.
"Election day was bumpy four years ago, and there is little reason to believe that we will go through this election without large movements," explainedLuno analysts. "After closing hours on election day, the S&P 500 futures dropped substantially before erasing all losses when Trump was announced as the winner. The market reacted positively to the republican winner and ended the week up 5%"
Many other bitcoiners believe that no matter who wins the U.S. election, stimulus and monetary corruption will continue. Alex Mashinsky, CEO of Celsius Network believes that as civil unrest and economic uncertainty heighten, central banks will try to pump liquidity into the faltering economy.
"The U.S. elections are increasing the uncertainty and the need companies have to have more reserves and more liquidity," Mashinsky explained. "The global economy is going through a slow motion recession, as the demand for goods and services is slowing down. Meanwhile, the central banks pump liquidity to try and reverse this trend. All of this is not good for GDP or for our employment rates. No matter who wins— we will have a severe recession in the next 2-3 years."
Do you expect cryptocurrencies to be volatile following the U.S. election? Let us know in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, skew.com,
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
A report published by major U.S.-based crypto exchange Kraken has identified signs the correlation between Bitcoin (BTC), the greenback, and legacy markets, is continuing to weaken.
Kraken's September volatility report found Bitcoin (BTC) largely maintaining a negative correlation with the U.S. Dollar Index (DXY) since May, despite a brief coalescence between the two markets in early September.
Bitcoin's 30-day rolling correlation with U.S Dollar Index: Kraken
The report attributes BTC's dollar divergence to the U.S. Federal Reserve's plan to maintain zero percent interest rates until at least 2023, in addition to declining growth rates. Meanwhile, Bitcoin has shown positive correlation with the Euro since May.
The report notes that while the start of the month saw an 8-month low for correlation between BTC and the S&P 500, the correlation would later increase as both markets experienced sideways consolidation.
Bitcoin's correlation with gold has remained positive since mid-July, with both markets experiencing bearish pressure over recent weeks.
Bitcoin's 30-day rolling correlation with Gold: Kraken
Looking forward, Kraken anticipates Bitcoin will post a stronger performance in October than in September, and this would be consistent with the trend exhibited in eight of the past nine years.
The report predicts October will drive an 11% gain for BTC, suggesting Bitcoin will close the month at $11,850 — a 3% gain from current price levels. However, Kraken notes that Bitcoin has underperformed its monthly average during six of the nine months that have transpired in 2020 so far.
Kraken's mild optimism is outshone by the bullish calls from two respected analysts. Former hedge fund manager Raoul Pal recently revealed he has shifted more than half of his personal investment portfolio into Bitcoin in anticipation of massive institutional adoption:
"Just from what I know from all the institutions, all of the people I speak to, there is an enormous wall of money coming into this."
And Alex Saunders from Nugget's News compared the current set up to mid-2017 and predicted that institutional appetite for Bitcoin was likely to trigger a "breathtaking rally":
July 2017. $BTC at $2700 & investors were scared of Segwit, hard forks & FUD. I shared a write up about a breathe taking rally I saw coming that would surprise us all.
"Publicly traded companies [and] legendary investors are singing from the rooftops about this new asset class at a time when there's record money sitting in bank accounts looking to find a home."
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