A large volume of Bitcoin options is about to expire, which could impact the next short-term price movement for BTC.
Around $1.8 billion worth of Bitcoin options contracts are set to expire today. This could impact price movements as Open Interest has topped 300,000. Open Interest (OI) is the total number of outstanding derivative contracts that have not been settled.
Bitcoin options are contracts that allow traders to speculate on the price of BTC. They allow traders to buy or sell Bitcoin at a specific price, the strike price, at a certain date of expiry.
Bitcoin Options Put/Call Ratio
Industry analyst Colin Wu reported that the put/call ratio was 0.66. However, Deribit currently has the 24-hour ratio at 0.81, meaning that longs and shorts are more closely aligned.
Generally, a ratio of 0.7 or higher means that traders are buying more puts (shorts) than calls (longs). This suggests that bearish sentiment could be building in the market.
The put/call ratio is calculated by dividing the number of traded put options by the number of traded call options.
A put option is a contract that gives the trader the right, but not the obligation, to sell or short the asset at a predetermined price within a specified time frame. A call option is the same but gives the buyer the right to buy or long the asset.
Furthermore, a put/call ratio of 1 indicates that the number of buyers of calls is the same as the number of buyers for puts.
According to Deribit, the last major contract expiry was in late December when around 135,000 contracts were liquidated. At the time, BTC prices fell by just 1%. However, they were already at the market cycle bottom.
The fall could be more significant this time since the asset has gained 45% since that bottom.
BTC Price Outlook
With current BTC prices at $23,900, the bears are struggling to push prices below this level. However, BTC is currently falling back, losing 2.4% over the past 24 hours.
Therefore, there could be further downside momentum today ahead of the options expiring. Additionally, the bulls were not expecting the four rejections of $25,000 over the past week either.
BTC has now eroded all gains over the past week, and there is little support below current levels, down to around $23,500.
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