Bitcoin’s max pain: Crypto market seems intent on inflicting maximum damage on options buyers
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Cryptocurrencies are mostly moving sideways this afternoon, with the market apparently intent on keeping Bitcoin trading around $US54,000 so it can inflict “max pain” on options buyers.
Some $US3.7 billion in monthly options on the Deribit exchange expire at 8am UTC Friday (6pm Friday, AEST), and $US54,000 is the “maximum pain” price – the value at which the options buyers would collectively suffer the most amount of financial damage as the derivatives settle outside the money. Those selling the options to buyers are typically institutions or sophisticated traders with plenty of capital to manipulate the market.
$3.7 billion expiry this Friday💥
Max pain for $BTC at $54k
Biggest OI in the 80k strike
Total calls outstanding 40k
Total puts 28k
68k contracts expiring which is 33% of our total OI
Total market OI for 30 April is 77k contracts, Deribit holds 88% pic.twitter.com/OlnguF7DGd
— Deribit (@DeribitExchange) April 26, 2021
“As we’ve highlighted earlier, large option expiries have tended to be followed by large moves in the last few months,” cryptocurrency company Luno said in this week’s market report, issued on Wednesday.
“The max pain strike of $54,000 could provide an anchor for the short-term price action in bitcoin and is a level to follow closely in the upcoming days.”
That prediction was proving prescient today, with Bitcoin trading at $US54,023 at 4pm AEST this afternoon, down 1.5 per cent from yesterday.
Almost that time of the month(lol) where everybody and the neighbor become experts with a vast amount knowledge regarding Options and the Max Pain impact at expiry within the crypto-ecosystem. 28/04 MP also at $54k, interesting🧐🚀 pic.twitter.com/cRViFVY8AL
— Crypto Mega💎🧲 NFT ARTIST (@MegaXBT) April 27, 2021
Messari Crypto researcher Mira Christanto documented how the options expiry influenced the price of Bitcoin in a Twitter thread earlier this month.
Options and futures are new critical datapoints for traders. While #Bitcoin was up +103% in Q1’21, we saw huge pullbacks end of each month.
What do you need to look out for this month?
— Mira Christanto (@asiahodl) April 12, 2021
Some traders were in wait-and-see mode to discover how the market would react following the expiry.
Not expecting too much today. Already since a couple of days waiting for the options expiry tomorrow. Seems the market is doing the same and is just chopping around a bit.
Expecting real and good PA after the expiry. Up 😉
Stay safe untill then!
— Crypto_Ed_NL (@Crypto_Ed_NL) April 29, 2021
Overall just 28 top 100 crypto assets had gained ground in the past 24 hours and the rest had lost it.
Pirate Chain was the worst loser, declining 18.2 per cent to $US6.68.
Fantom was the biggest gainer, rising 34.1 per cent to 68c.
Ethereum was trading at $US2,729 ($3,461), up 5.3 per cent from yesterday.
UniSwap and PancakeSwap, tokens used in two decentralised exchanges, had both hit all-time highs in the past 24 hours – shortly after lunchtime today.