A recent tweet by Skew Markets claims that 50% of total bitcoin options open interest is set for a drop-off in December. A big expiry is ahead!
Bitcoin Price Slated To Rise Post Stabilization of Open Interest
In case previous scenarios are considered, one or two weeks prior to the expiry, new quarterly contracts will be rolled out. Subsequently, open interest will decrease in December and then increase again in March. CME futures will expire in December and this would lead to a decrease in the open interest.
Source- Skew Markets
With that being said, when both price and open interest decline it gives rise to liquidation by discouraged traders with long positions. If the trend continues it leads to a price decline. Once open interest stabilizes, prices began to rally again. Further, if the open interest numbers show minimal oscillation, it is followed by a price rise and also a rise in open interest.
CME Futures Expiry Led to A Rally in March 2019
During the expiry of CME futures in 2018, the price of Bitcoin dropped from $3,850 to $3,550 in the day before the expiration, with an even bigger drop from $4,200 to $3,550 in the 4 days before the expiration. Interestingly, two days before February expiration the price of Bitcoin (BTC) rising from $3,900 to $4,150 before crashing to $3,700. As a matter of fact, the rally did not begin until after the March expiration. This implies that either the CME traders shorted Bitcoin to protect their positions or it was a coordinated effort to start a rally post-March expiration.
Leading Market Analyst Predicts BTC Price Peak in Early 2020
Adaptive Fund Partner and analyst,