This Friday, Deribit will have about $10 billion bitcoin options due. The market is now more concerned about whether large-scale contract consolidation and extension will magnify short-term fluctuations, rather than whether prices will necessarily converge to the so-called “maximum pain point”.
Cash is below $72,000 in pain.
The biggest point of pain for this maturity is about $72,000, while the spot price of Bitcoin is currently about $6.17 million, with a wide gap. The contract is scheduled to be settled at 8:00 in Deribit on Friday, Eastern United States.
The maximum pain point usually refers to where the maximum price is lost by the right buyer when the right expires. Around this concept, there is a long-standing argument in the market that the spot price may be pushed to this point as it approaches settlement.
I haven't seen the price pegged since the due date.
However, recent market developments do not support this determination. Bitcoin has fallen from $67,000 at one time to $60,000, in the days prior to this settlement, contrary to the expectation that prices will return to the point of greatest pain.
According to the Wintermute off-site trader Jasper De Maere, the current Deribit maturity is about US$ 10.2 billion, and although the most painful point is US$ 72,000, the recent expiry of options has not mechanically pushed prices to a settlement point, as the market expected.
It's still possible to zoom in.
Nevertheless, this expiration was considered an important liquidity event. Deribit believes that the expiration of June is one of the largest settlement windows this year, and billions of dollars of contracts will expire or be transferred to more distant monthly contracts.
Such centralizations are often accompanied by market, hedge and peace silo adjustments, which easily pushes the wavelength of the disk. Dealers are now more concerned about the direct impact on prices of trades, extensions and changes in liquidity before and after maturity than about whether the “maximum pain point” is effective.