Will crypto markets crash as $4.3 billion worth of Bitcoin options expire?

On Friday, July 26, approximately 61,200 Bitcoin options contracts were traded, with a notional value of approximately $4.26 billion.

The option's expiration event is at the end of the month, so it is larger than a regular expiration.

Additionally, the spot market lost momentum this week despite the launch of the first ever spot Ethereum ETF in the United States.

Bitcoin Options Expiry

Today's high volume of Bitcoin derivatives trading has a put/call ratio of 0.61, meaning that there are nearly twice as many long contracts expiring as short contracts.

According to Deribit, open interest at the higher strike prices appears to favor the bulls, with $942 million at the $70,000 strike and a whopping $1.3 billion at the $100,000 strike.

On the put side, there is an OI of about $500 million with a strike price of $60,000.

In addition to the BTC contracts, there are around 500,000 Ethereum options contracts expiring on July 26. These have a notional value of $1.76 billion.

The put/call ratio for ETH contracts expiring is 0.46, meaning that there are more than twice as many long contracts expiring as short contracts. According to Deribit, the largest open interest is at the $4,000 strike price, amounting to over $520 million.

The combined notional value of the two cryptocurrency options is around $6 billion, making this one of the largest expiry events this year.

Additionally, the Ethereum ETF recorded a second consecutive day of outflows on July 25th, with an overall outflow of $152 million. This was driven by another large outflow from Grayscale of $346 million, despite BlackRock and Fidelity seeing combined inflows of over $100 million.

Impact on the cryptocurrency market

The spot market has fallen by around $120 billion this week, with Bitcoin dropping to as low as $64,000 on July 25th.

BTC recovered from early July's lows of $54,000 but failed to break through the $68,000 resistance earlier this week and fell back, but managed to recover above $67,000 during Friday morning's Asian trading session.

Ethereum has fared much worse, despite the launch of its spot ETF. ETH has fallen 11% since its launch date, dropping to as low as $3,100 on July 25, before recovering to $3,250 during Friday’s Asian session.