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BTC | Deribit Analysis of Options Market Impact: The Thorny Crisis Continues, Investor Benson Reveals Market Observations on Bitfinex

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BTC | Deribit Analysis of Options Market Impact: The Thorny Crisis Continues, Investor Benson Reveals Market Observations on Bitfinex

Why did Bitcoin drop? How low will it go? The world's largest Bitcoin options exchange, Deribit, commented, "It seems to be a significant options liquidation event, causing a lack of liquidity and creating chaos in the BTC options market." Well-known Taiwanese investor Benson also shared his market observations on Bitfinex.

Deribit Researcher Analyzes Coin Price Turmoil

Researcher Tony Stewart explained that the content requires a certain understanding of the options market. Taiwan's renowned investor, Benson, summarized it to make it easier for readers. Benson stated that primarily due to Musk's remarks, a massive number of bearish option sellers had to close their positions as they couldn't withstand the substantial loss pressure. He explained, "Selling bearish options means not believing that Bitcoin will drop below a certain price and aiming to earn premiums." Some of the option combination strategies proposed by Tony Stewart are most severely affected by Musk's influence.

Below is the post by researcher Tony Stewart:

Researcher Tony Stewart mentioned that this indirectly shorted volatility in the range of 45,000 to 46,000 on Friday, though it is not directly related to bearish option buyers. Notably, short gamma, shorting gamma values, representing bearish volatility, has led to significant liquidation pressure due to Bitcoin's spot price hovering at a low of 40,000.

He noted that a large-scale liquidation of two combinations of bearish options, including In The Money (ITM) for May and December and Out The Money (OTM) from May to September, occurred mainly due to short covering.

He believes that Bitcoin's spot price has not been substantially affected, and Musk's clarification with Tesla about not selling Bitcoin may have alleviated the decline.

He continued, stating that most of the electronic trades executed were small transactions resembling robot behavior, causing significant impacts during times of low liquidity in Asia and Europe on Sundays and Mondays. Before the pullback, the Implied volatility quickly surged from 100% to 200%, followed by market makers' liquidation.

He remarked, "The tricky crisis is still ongoing but currently under control." He also warned of the presence of put options for 45,000 and 46,000 on May 21.

Investor Benson: Bitfinex and Options Market Worth Watching

Taiwan's renowned cryptocurrency investor, Benson, stated in the early hours of the 18th:

"Starting from 11 p.m., the leveraged short positions on BFX surged sharply, forming a counterparty to the BFX bulls, with leveraged bottom fishing on one side and leveraged selling on the other, creating a situation akin to a celestial battle, leading to abnormal trading volume on BFX in the past few hours.

The increasing open interest on perpetual contracts on Binance also indicates an increasing amount of chips on the table. The more chips on the table, the more astonishing the direction will be. This is likely the dividing line between bears and bulls. I believe the last defense line for bulls is 38K-40K. If the price reaches this level, there must be a rapid rebound; otherwise, the bullish defense will fail. If the daily closing for two consecutive days falls below 40K, I will consider cutting losses.

From a risk-reward perspective, this is a place with a 10%-15% stop-loss distance for a 50%-100% upward potential. It's critical but not a guaranteed win, so everyone must manage risks effectively.

PS: Deribit has 40,000 BTC in options at the end of May, with a max pain price around 54,000, and there are around 10 days until the end of the month. I hope the major put option sellers on Deribit will help to hold the line; otherwise, the 43K put buyers will make a profit."