This week, the cryptocurrency market prepares for the expiration of approximately 16,500 Bitcoin options contracts valued at around $1.6 billion, set to take place on Friday, February 21. While this expiry represents a smaller event compared to last week, it remains one of the least impactful expirations of the year, suggesting minimal influence on the spot markets that have predominantly remained range-bound throughout the week.
Understanding Bitcoin Options Expiry
The current batch of Bitcoin options has a put/call ratio of 0.75, indicating a slight preference for call contracts over puts. Furthermore, open interest (OI) reveals that the greatest concentration of unsettled contracts remains at the $120,000 strike price, equating to $1.8 billion, as reported by Deribit. This is followed by another significant $1.2 billion in OI at the $110,000 strike price, reflecting traders’ speculative outlook for long-term price increases in Bitcoin. However, sentiment analyzed by crypto derivatives provider Greeks Live points to a ‘cautiously bearish’ attitude in the market, with low volatility posing considerable challenges for traders.
“Next week’s options priced at 40% volatility again with front-month contracts falling below, indicating potential market weakness,” it stated.
In agreement, Deribit’s weekly Insights report expressed that, “Strong directional sentiment in derivatives markets has waned in response to the largely sideways moves in spot [markets] over the last two weeks.” It is also worth noting that funding rates for both Bitcoin (BTC) and Ethereum (ETH) are hovering near zero following Ethereum’s earlier significant spike in negative funding rates this month, indicating a premium volatility level in Ethereum compared to Bitcoin.
In conjunction with Bitcoin, approximately 153,000 Ethereum options contracts are also set to expire today, totaling a notional value of $420 million and exhibiting a put/call ratio of 0.48. When combined, Friday’s crypto options expiry will amount to around $2 billion.
Crypto Market Outlook
As the week draws to a close, crypto markets have displayed modest gains, with total capitalization reaching approximately $3.35 trillion. Nevertheless, analyzing broader trends shows that the markets remain within the lower bounds of a three-month sideways trading range. Bitcoin experienced an intraday high of $98,750 during early trading in Asia on Friday but encountered resistance, leading to a slight pullback.
In parallel, Ethereum has seen volatility over the past 24 hours, climbing to $2,767 before retracing to $2,744 at the time of writing. ETH has been trading sideways since it fell below $3,000 earlier this month.
Overall, altcoins demonstrated a positive trend this Friday morning, with notable gains for tokens such as Solana, Sui, Avalanche, and Litecoin, as anticipation for potential ETF approval grows.
The culmination of these events raises intriguing questions about market behavior post-expiry. The extent of the impact from expiring options is a subject of ongoing analysis and speculation, reflecting a complex interplay between derivatives and spot market dynamics.
