$5.3 Billion Bitcoin Options Expired, Market Remains Unaffected as Investment Inflows Slow Down

The expiry of Bitcoin derivatives contracts that has been making the crypto market nervous, which some described as an “earthquake,” helped the price of Bitcoin move 4.8%.

Yesterday, the price of Bitcoin dropped to $50,300 only to end the day higher above $52,500. Today we went as high as $53,800 following the expiry of the Bitcoin options.

Deribit reported a total of $6.4 billion worth expiry — 99k BTC options, with $5.1 billion notional along with BTC March Futures of $240 million and 608k ETH options with $1 billion notional and ETH March Futures of $51 million.

As of writing, BTC is trading around $53k and Ether $1,600. ETH 7.89% Ethereum / USD ETHUSD $ 4,081.58
$322.047.89% Volume 18.39 b Change $322.04 Open $4,081.58 Circulating 118 m Market Cap 481.65 b 3 h Massive Retail Demand for First Bitcoin Futures ETF Made its Debut As the 2nd Highest Traded Fund In History 19 h Interactive Brokers Launches Bitcoin, Ethereum, and Crypto Trading for RIAs in the US 23 h Sports Betting Platform DraftKings to Become Polygon Network Validator & Support Custom NFTs Drops in Marketplace

According to Tony Stewart, who has previously headed the trading desk, “It's currently irrelevant for Crypto Options, particularly when the Max pain is not near the current spot.”

“Serious experienced option players are laughing at the narrative. It is only good for exchanges to promote large numbers.”

Given that the options market is becoming bigger and bigger in terms of trading volume and open interest (OI), it does affect the underlying spot market prices, as we saw during the January expiry that helped push the BTC price from $32k to nearly $39k.

But this time, the maximum pain was around $44k, and there was also a decrease in options open interest by about $70 million before the expiry.

Volatility trader @merpetual is “short volatility right now and bullish volatility into the end of April,” as call net positioning is around $80k for the month.

Expiry: There was no max pain – I think if it was anything spot pinning $52k wld have been the most irritating outcome. Dealers were generally long gamma. A few small sellers, a few small buyers, a few flat (fwiw we were what I wld call neutral & net bot btw 50 – 100btc). 1/2

— Orthogonal Trading (@OrthoTrading) March 26, 2021

The Bitcoin market has slowed down in March despite hitting a new ATH in the second week of the month. This coincides with the March seasonality, which has historically ended as a bear month.

According to CryptoCompare’s report, March was a quiet month for digital asset investment products, as well as volumes dropped by 17.6%, and average weekly investment inflows slowed by 70.5%. Still, total AUM continued to rise month on month and now stands at roughly $58.7 billion.

The world’s largest digital asset manager, Grayscale Investments and 31Q are currently trading a discount. The market premium for both dropped dramatically, with 3iQ’s QBTC product trading at a discount of 4.34%.

The $34 billion Grayscale Bitcoin Trust (GBTC) dropped about 20% so far this week and is currently trading at a 9.74% discount despite the fund’s parent company Digital Currency Group planning to purchase up to $250 million worth of shares.

“GBTC has a fixed supply and acts like a leveraged play on Bitcoin,” Bloomberg Intelligence analyst James Seyffart said. “As price goes down, sentiment goes down, GBTC is going to fall further than Bitcoin. Same thing happens on the way up.” The debut of several Bitcoin ETFs in capital (Fidelity, Goldman Sachs, VanEck, Valkyrie, NYDIG, Wisdom Tree, and Skybridge Capital) may have pulled away capital from GBTC as well.

“This shift may be a reflection of increased competition from alternative digital asset investment product providers,” noted CryptoCompare.