Today’s chart that the cat dragged in is illustrating an interesting correlation of BTC options expiry and future price movement. This is relevant right now because tomorrow $4 billion in BTC options contracts stand to expire. It’s quite a lot, since at the end of march expiry of quarterly and monthly options was around $5 billion.
First thing to know – “max pain” price is $54k which is very close to the current trading price. The max pain price is the price at which most options are rendered worthless, thus leading to the loss of the option premium for the options holders. This means it is in big players (option writers) vital interest to keep BTC price around this level, and this are institutions with quite extensive means to do so.
But onto the chart, because it is interesting what can happen next: price increased 17% on average from the day prior to the monthly expiration to four days after. It also looks like day of options expiry signaled a local bottom territory more than once.
This chart comes from Jarvis labs blog - a place I can honestly recommend if you want some original market analysis.
So, here you have it, what more comment do you want ;)
Of course it’s not guaranteed, of course it is just one factor impacting the market but it looks like a pretty reliable pattern. It also has some explanation behind it. Price behaves like this mainly due to released liquidity – to put it simply all the effort made to keep price in check around “max pain” a wrote about earlier is now over, positions are closed, no need hedge risk of issued options, price is free to move as it likes, and there are funds on the market to push it.
If you were impatiently waiting for some major move on BTC, there is increased probability it will come after those pesky options expire.
All tips go to cat treats and catnip :)