Bitcoin price volatility is expected to be high next Friday, as 47% of the options on the leading cryptocurrency expire during this period, Cointelegraph reports. The expiration of the options means that BTC may be on the cusp of a move defining a further trend.
Bitcoin Options (BTC) open interest is only 5% below their all-time high, but almost half of them will be closed by the upcoming September expiration. While the current $ 1.9 billion in options suggests that the market is alive and well, it is unusual to see such a focus on short-term options.
By itself, the current numbers should not be considered bullish or bearish, but a decent amount of open interest and liquidity is needed to allow larger players to participate in such markets.
Notice how BTC's open interest has just broken the $ 2 billion barrier. Coincidentally, this is the same level that has been reached in the last two expirations. This is normal. However, this number is expected to be recalculated and decreased after each calendar month.
There is no magic level to maintain, but the distribution of options by month allows for complex trading strategies.
More importantly, having liquid futures and options markets helps maintain spot (regular) volumes.
Low risk aversion
In order to assess whether traders are paying large premiums for BTC options, implied volatility must be analyzed. Any unexpected significant price movement will cause a sharp rise in the indicator, regardless of whether this change is positive or negative.
Volatility is commonly known as the fear index, as it measures the average premium paid in the options market. Any sudden price changes often cause market makers to be risk averse and therefore demand a higher premium on option trades.