Featured: BTC, Future and options,100k BTC expiry, Option chain analysis.
Overall, 2020 has not been a great year for economies around the year, almost all the stock indices plummeted massively due to Covid-19 pandemic which resulted in lockdowns, financial instability among countries. But, this large scale hustle and bustle in traditional markets has resulted in re-emerging of the non-conventional assets like cryptocurrencies.
Crypto markets are the only asset class which was able to reap all the benefits due to this global scale disturbance. Enormous printing of money by the central banks has devalued the fiat money to a great extent, which forced the traditional players to enter into this decentralized world. Largest crypto asset, BTC, gained more than 160%.
Crypto derivative volume has also gained amazingly in the last 6 months as more and more retail and institutional want exposure in the crypto markets. Currently, BTC markets are in full bull mode and some analysts are targeting the levels of $100,000 per BTC. Last week, Deribit exchange, a crypto derivatives exchange, began offering BTC options with a $100,000 strike, expiring on 24th Sept 2021.
But as 2020 is nearly over, BTC too might have to face the wrath of this year. On the day of Christmas eve i.e 25th December, roughly around $2.3 billion worth of BTC futures are going to expire which is most like to result in higher volatility than normal, also this is the last expiry of this year. In addition to this, 102,200 BTC, which is ~2.3 million worth of BTC options will also expire.
This grand expiry on a single day is expected to result in the highly volatile day for BTC. A lot of choppiness in the market is expected as holders will adjust their contracts and due to this, there can be multiple repercussions. For instance, traders who are already in profit might book their gains and dump the flagship crypto asset.
Bitcoin Options Chain Analysis
As per Bitcoin options chain analysis, maximum Open interest(OI) on the Call side is present at 24,000 strike followed by 25,000 strike. It indicates that there is a huge selling pressure/ resistance above the level of $24,000 and also, BTC has tested this level twice but has not been able to breach this level decisively.
On the Put side, maximum OI is present at 15,000 followed by 16,000 strike, but it is highly unlikely that BTC will touch this level in the near term. Other strikes with decent OI includes 19,000, 20,000 and 22,000.
Max pain is present at 22,000 strike, followed by 23,000 strike. Therefore, it is highly expected that BTC might expire in this range.
The Call/Put ratio(OI) stands at 1.60, which signals strong bullish sentiments in the market, that may result in mild profit-booking
Even after delivering more than 150% in this year, BTC is still in the middle of the bull rally that’s being fuelled by heavy buying by traditional funds and Over the counter (OTC) trades. Even with expected volatility in the coming session, there’s a good chance that Bitcoin will remain well supported by strong institutional demand, for instance, Greyscale bought $3.5 billion worth of BTC in the last 10 days alone. In 2020 alone, active BTC addresses have more than doubled, this shows that the fundamental factors are still very strong.
Also, there has been a rise in illiquid wallets as per the Chainanalysis.com. Addresses that have sent less than 25% of the BTC they’ve ever received and as per the data, illiquid wallets hold 77% of the 14.8 million mined BTC that hasn’t been lost.
So to conclude, there is massive demand coming in the middle of a supply crunch, which is very positive news for the bulls, but small corrections on the way up cannot be overlooked.
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