Total BTC Open Interest keeps climbing with Record High Option Open Interest set to Expire Tomorrow

Could record levels of BTC open interest be putting a lid on BTC prices?

In what will be the largest Option Expiration ever, over $1 billion worth of BTC options contracts are set to expire tomorrow.

The majority of these are on Deribit, but the CME options products account for roughly $300 million worth.

This is a big leap for the CME which had seen little activity in their BTC options product compared with the BTC futures product.

Check it out:

(source: https://research.arcane.no/feed/total-open-interest-on-cme-reaches-new-all-time-high)

Not only are we seeing record option open interest, but we are also seeing record open interest across all BTC derivative products.

Though, the recent surge is mostly being driven by an increase in demand for the options products.

(Source: https://research.arcane.no/feed/total-open-interest-on-cme-reaches-new-all-time-high)

But wait, I thought bitcoin was just moving along with stocks?

Bitcoin has been highly correlated with stocks as of late, there is no denying that, but there may be something else at play.

The record open interest levels are very interesting to watch for several reasons.

It means that institutions (likely) are participating more than ever in the bitcoin markets which is a new development for the bitcoin market as whole.

However, what is most interesting is the large open interest set to expire tomorrow.

The vast majority of this open interest is well out of the money at this point and is likely going to stay that way baring a minor miracle that launches BTC well over $10k within the next several hours, as the majority of this open interest is at strikes $10k and higher.

The max pain theory of options investing tends to go by the idea that prices often gravitate towards the levels that would cause the most pain for the largest number of contract holders, IE wherever the least amount of money is positioned for.

This theory is likely playing a role in BTC staying under $10k heading into expiration tomorrow, and of course weakness in the stock market isn't helping BTC either.

The really interesting thing will be to see what happens when all these options contracts expire worthless tomorrow.

Will the lid on $10k finally be removed or is BTC now tethered so tightly to the S&P that it will need a sharp move higher in equities before it can break and hold $10k?

Some are expecting volatility around the expiration tomorrow, but I think most of these positions have already waived the white flag and trading will be mostly subdued in BTC leading into the expiration.

Either way, we are about to find out soon enough.

Stay informed my friends.

-Doc

Posted Using LeoFinance