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Bears reign as 86% of September’s $284M CME Bitcoin options are worthless

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As of now, the $622 million total open interest for BTC futures expiry on Friday seems quite relevant. 

This Friday, a total of $100 million in CME Bitcoin (BTC) options are set to expire. 58% of these are call (buy) options, meaning buyers can acquire BTC futures at a fixed price.

As the expiry draws near, call options 10% or higher above the current BTC price are deemed worthless. Therefore, there’s not much to gain in rolling over this position for October. 

September CME call options open interest (contracts). Source: CME

Each CME contract represents 5 BTC, and the chart above shows which are the most significant levels for September call options. 

Note that a striking 86% of those are set at $11,300 and above. Hence those options are currently priced at $10 or less. 

This means there will be less pressure coming from the CME options expiry, with $8 million call options open interest ranging from $10K to $11K. 

On the other hand, put options between the same range amount to $12 million in open interest. As both call and put options are relatively balanced, the overall impact should be little to none. Therefore, one must check the remaining exchanges to analyze the options expiry impact.

As the options markets leader, Deribit, holds a 75% share, equating to $554 million worth of open interest in BTC options set to expire this Friday. This figure is evenly distributed between call (buy) and put (sell) options.

Deribit September BTC options open interest

Deribit September BTC options open interest. Source: Deribit

Unlike CME, Deribit traders have been more modest as only 70% of the call options open interest for September sits at $11,250 and above. As for the ones ranging from $10K to $11K, there’s $74 million in call options stacked against $110 million in put options.

Although the Deribit number is far more significant than the CME’s, the $26 million imbalance does not seem relevant considering the underlying $2 billion in BTC daily volume.

Futures expire, but there can’t be an imbalance

Futures contracts are a completely different instrument from options, as buyers and sellers must be evenly matched at all times.

Although every contract is similar, perpetual futures (inverse swaps) do not expire. They are simply rebalanced every 8 hours, which means there is no impact on expiry dates.

On the other hand, some derivatives exchanges offer regular futures contracts with monthly expiry. Unlike options markets, these traders can keep their positions open by rolling over ahead of expiry.

CME has $284 million worth of BTC futures set to mature on Friday, although this figure should be reduced as traders move positions to October and November contracts. 

OKEx leads the remaining exchanges with $147 million, while Deribit has $73 million, Huobi $63 million, and BitMEX holds $46 million.

As of now, the $622 million total open interest for BTC futures expiry on Friday seems quite relevant, considering spot (regular) exchanges maintain $2 billion in daily volume. 

Friday’s CME expiry no longer poses a threat

During most of 2018 and 2019, there has been a pretty consistent Bitcoin price drop ahead of each monthly CME expiry. A more recent Cointelegraph study has shown that since October 2019, these such movements ceased to exist. 

To further disprove the CME negative price impact theory, let’s look at the last three expiries.

BTC price in USD

BTC price in USD. Source: TradingView

June was the only month where a 2% negative performance preceded the contract expiry.  Meanwhile, both July and August presented positive returns, therefore invalidating any negative expectations.

The above data shows traders should be less worried about CME expiry, as it does not seem to have produced a significant impact in the previous months. Most likely the high correlation with the S&P 500 has been the primary reason behind the CME’s decaying influence.

As for the 86% of worthless CME call options, those buyers will most likely have less appetite for the upcoming exposure. Therefore, overall sentiment from Friday is likely to have a negative impact going forward.

Both OKEx and Deribit weekly contracts mature September 25 at 8:00 AM (UTC). Later on that day, CME futures are set to expire at 3:00 PM (UTC).

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.





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China’s attempt to kill Bitcoin failed — Here are 3 reasons why

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Bitcoin (BTC) might have suffered its largest coordinated attack over the last couple of months, but in this instance, the investor community did not capitulate. China outright banning mining in most regions after giving BTC miners a two-week notice and this caused the single largest mining difficulty adjustment after the network hash rate dropped 50%.

The market sentiment surrounding Bitcoin was already damaged after Elon Musk announced that Tesla would no longer accept Bitcoin payments due to the environmental impact of the mining process. It remains unknown whether China’s decision was influenced or related to Musk’s remarks, but undoubtedly those events held a negative effect.

A couple of weeks later, on June 16, China blocked cryptocurrency exchanges from web search results. Meanwhile, derivatives exchange Huobi started to restrict leverage trading and blocked new users from China.

Finally, on June 21, the People’s Bank of China (PBoC) instructed banks to shut down the bank accounts of over-the-counter desks and even their social networks accounts were banned. OTC desk essentially act as a fiat gateway in the region so without them it would be difficult to exchange from Bitcoin to stablecoins.

As these events unfolded, some analysts were reluctant to describe the tactics as nothing other than meaningless FUD, but in hindsight, it appears that China launched a very well-planned and executed attack on the Bitcoin network and mining industry.

The short-term impact could be considered a moderate success due to the collapse in Bitcoin price and the rising concerns that a 51% hashrate attack could occur.

Despite the maneuvers, China’s attack ultimately failed and here are the main reasons why. 

The hashrate recovered to 100 million TH/s

After peaking at 186 million TH/s on May 12, the Bitcoin network hash rate, an estimate of the total mining power, started to plunge. The first couple of weeks were due to restrictions to coal-powered areas, estimated at 25% of the mining capacity.

However, as the ban extended to other regions, the indicator bottomed at 85 million TH/s, its lowest level in two years.

Bitcoin estimated hashrate. Source: Blockchain.com

As the data above indicates, the Bitcoin network’s processing power recovered to 100 million TH/s in less than three weeks. Some miners had successfully moved their equipment to Kazakhstan, while others shifted to Canada and the U.S.

Peer-to-peer (p2p) markets carried on

Even though the companies involved in crypto transactions have been banned from the country, individuals continued to act as intermediaries—some of these recorded over 10,000 successful peer-to-peer transactions according to data from the exchange’s own ranking system.

Huobi Global peer-to-peer market advertisement. Source: Huobi

Both Huobi and Binance offer a similar marketplace where users can trade multiple cryptocurrencies including USD Tether (USDT). After converting their fiat to stablecoin, transacting on a regular or derivatives exchange becomes possible.

Asia-based exchanges still dominate spot volume

A complete crackdown on trading from Chinese entities would likely be reflected in the exchanges previously based on the region, like Binance, OKEx, and Huobi. However, looking at the recent volume data, there hadn’t been a meaningful impact.

Weekly spot volume, USD. Source: Cryptorank.io

Take notice of how the three ‘Asia-based’ exchanges remain dominant, while Coinbase, Kraken, and Bitfinex are nowhere near their trading activities.

China’s ban on Bitcoin mining and transactions may have led to some temporary hiccups and a negative impact on BTC price, but the network and price have recovered in a way that is better than many expected.

Currently, there is no way to measure the OTC transactions where larger blocks are traded but it is just a matter of time until these intermediaries find new gateways and payment routes.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.