Analysis: $3.9B Bitcoin options expiry will be ‘unremarkable’ if April closes at $60K

On April 14, the price of Bitcoin peaked at $64,900, which was followed by a 27% correction that took the price of Bitcoin down to $46,000.

The decline quickly liquidated more than $9 billion in long Bitcoin futures contracts, a move that was previously unimaginable to most investors.

Despite Bitcoin’s price rallying back to $56,000 in the past 48 hours, bulls have been unable to surprise bears in the options market as the two sides are largely in balance ahead of the April 30 expiration.

Bitcoin price on Coinbase Source: TradingView

Just three months ago, total open interest in Bitcoin futures was $11 billion, but on April 13, it hit a record of $27.7 billion. Still, this shows how huge the impact of the recent price correction has been.

Meanwhile, the options market works differently because the buyer of the contract pays upfront. Therefore, there is no risk of forced liquidation by the holder. Call (buy) options offer the buyer upside price protection, while put options do the opposite.

Therefore, investors seeking neutral and bearish strategies will rely primarily on put options. On the other hand, call options are more commonly used by bullish traders.

Although some exchanges offer weekly options contracts, monthly options contracts typically see greater trading volume. April is no exception, with 72,000 bitcoin options contracts worth $3.9 billion set to expire.

Cumulative open interest in Bitcoin options at expiration Source: Bybt

Note that April options are more dominant than May or September. While neutral to bullish call options dominate on April 30, with call open interest 41% larger than put open interest, interpreting this data requires more detailed analysis.

It’s worth noting that not all options will trade on the expiration date, as some of these strike prices don’t sound reasonable right now, especially considering there are less than two days left.

Extreme call options are now worthless

To understand how these competing forces are balanced, we should compare the size of call and put options at each expiration price (strike price).

Cumulative BTC options open interest on April 30 Source: BYBT

While these $80,000 to $120,000 call options may seem unlikely, they are often used in a “horizontal spread” strategy. As previously explained by Cointelegraph, buyers could profit even if Bitcoin trades well below these strike prices.

These extremely bullish options are now effectively worthless, as there is no upside to the right to acquire Bitcoin at $80,000 when it expires on April 30. The same applies to neutral to bearish put options at $48,000 or lower.

Therefore, it is better to evaluate a trader's position by excluding these unrealistic strike prices.

$54,500 shows a balanced situation

There are 9,950 bitcoins in neutral to bullish call options at $58,000 and below. At current bitcoin prices, this equates to $540 million in open interest.

On the other hand, the more bearish put options at $51,000 and below total 12,000 Bitcoin, with these open interest currently worth $650 million.

Another 3,850 Bitcoin put options will also be exercised if the price of Bitcoin falls below $50,000. This figure represents $700 million in open interest.

Currently, both call and put options appear to be roughly balanced. Considering that the difference of $100 million to $150 million between the two may not be enough to motivate either side to put pressure on prices, the contract expiration this month may be "quiet."

Deribit, OKEx and Bit.com futures and options will expire at 8 a.m. UTC on April 30. CME futures and options expire at 3 p.m. UTC.