Over the past ii months the open interest on Bitcoin options has held reasonably steady fifty-fifty every bit the figure increased past 118% to achieve $8.4 billion as (BTC) price rose to a new all-time high. The event of Bitcoin'south cost appreciation and the rise open interest on BTC options has resulted in a historic $3.eight billion expiry gear up for Jan. 29.

BTC options amass open up interest. Source: Bybt.com

To sympathize the potential impact of such a big death, investors should compare it to the volumes seen at spot exchanges. Although some data aggregators brandish over $50 billion to $100 billion in daily Bitcoin book, a 2019 report authored by Bitwise Asset Management found that many exchanges employ a variety of questionable techniques to inflate trading volumes.

This is why when analyzing exchange volume, it'southward better to source the figure from trusted data aggregators instead of relying on the data provided by the biggest exchanges.

BTC spot exchanges aggregate volume (USD). Source: Bybt.com

As the to a higher place data indicates, BTC'southward spot volume at exchanges averaged $12 billion over the past 30 days, a 215% increase from the previous calendar month. This means the upcoming $3.8 billion expiry translates to 35% of spot BTC daily average volume.

45% of all Bitcoin options expire on January 29

Exchanges offer monthly expiries, although some also concord weekly options for short-term contracts. December. 25, 2020 had the largest death on record equally $2.4 billion worth of choice contracts expired. This effigy represented 31% of all open up interest and shows how options are usually spread out throughout the year.

Deribit BTC options open involvement by expiry. Source: genesisvolatility.io

Information from Genesis Volatility shows that Deribit's death calendar for Jan. 29 holds 94,060 BTC. That unusual concentration translates to 45% of its contracts gear up to expire in twelve days. A similar effect holds at the remaining exchanges, although Deribit has an 85% market place share overall.

It is worth noting that non every option will merchandise at decease as some of those strikes now sound unreasonable, especially considering there are less than two weeks left.

Deribit BTC Jan. 29 options open up interest by strike. Source: genesisvolatility.io

The bullish $46,000 phone call options and above are now deemed worthless and the same has happened to the bearish put options beneath $28,000, equally 68% of them are at present finer worthless. This means that simply 39% of the $3.viii billion prepare to expire on Jan. 29 are worth exploring.

Analyzing open interest provides data from trades that accept alreadyd passed, whereas the skew indicator monitors options in real time. This estimate is fifty-fifty more relevant equally BTC was trading below $25,000 merely thirty days ago. Therefore, the open involvement nearly that level does non indicate bearishness.

Market makers are unwilling to have upside risk

When analyzing options, the 30% to 20% delta skew is the unmarried about relevant approximate. This indicator compares phone call (buy) and put (sell) options side-by-side.

A x% delta skew indicates that call options are trading at a premium to the more than bearish/neutral put options. On the other manus, a negative skew translates to a higher cost of downside protection and is a signal that traders are bearish.

Deribit Bitcoin options xxx-20% delta skew. Source: genesisvolatility.io

According to the data shown to a higher place, the last time some bearish sentiment emerged was Jan. 10 when Bitcoin price crashed past 15%. This was followed by a period of extreme optimism as the thirty%-twenty% delta skew passed 30.

Whenever this indicator surpasses 20, it reflects fear of potential price upside from market makers and professionals, and every bit a result, is considered bullish.

While a $iii.viii billion options decease is spine tingling, near 60% of the options are already accounted worthless. As for the remaining open interest, bulls are mainly in control because the recent price hike to a new all-time loftier obliterated near of the bearish options. With the death moving closer, a growing number of put options will lose their value if BTC remains above the $30,000 to $32,000 range.

The views and opinions expressed hither are solely those of the autho r and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves gamble. You should conduct your ain research when making a determination.