Why Bitcoin fell overnight? Over 50,000 bitcoin futures are about to expire

The price of bitcoin has been falling since its yearly peak of $12,473 on Aug. 17.

The sudden rise in the price of the largest digital asset has caught the attention of traders who are busy trading altcoins while BTC is in a consolidation phase. Despite a slow week, Bitcoin futures open interest hit an all-time high of $5 billion, which translated into higher open interest in the BTC futures market.

Foreign media: Chip shortage is hitting China's bitcoin mining industry: On January 23, the media issued an article saying that due to the lack of mining chips around the world, China's bitcoin miners are facing setbacks. Wayne Zhao, chief operating officer of TokenInsight, explained in a report that China once accounted for 80% of the total global Bitcoin mining activity due to the low cost of disposable electricity. However, that figure has now dropped to 50% as institutional investors are actively buying the asset and demand for Bitcoin has skyrocketed. (AMBCrypto) [2021/1/23 16:49:23]

Despite the buoyant retail market, institutional interest in the Bitcoin market has been on the decline for the past few days. According to the data provider, skew institutional investors are currently moving away from Bitcoin futures contracts, with Bakkt’s drop in open interest particularly prominent.

Opinion: New bitcoin breakout 'coming soon': Hedge fund Vailshire Capital Management says a new bitcoin breakout is 'coming soon' with a high probability of a rally. He also pointed out that Bitcoin’s technical indicators and on-chain indicators are “very bullish,” with Bitcoin hitting a three-day high against the U.S. dollar. Additionally, the firm’s founder and CEO, Jeff Ross, described the outlook for BTC’s performance as “wildly bullish.” (Cointelegraph) [2021/1/20 16:33:42]

OI on the platform peaked at $27 million on August 3 and has since dropped to $9.9 million. On the other hand, Chicago Board of Trade (CME) also noted open interest, which decreased from its ATH of $948 million to $789 million.

LedgerX Announces Physically-Settled Bitcoin Futures Contract: US-compliant cryptocurrency derivatives exchange LedgerX has announced the launch of a physically-settled Bitcoin (BTC) futures contract. LedgerX's orders are fully transparent in terms of market depth, allowing institutions to evaluate the market. (Cointelegraph)[2020/9/9]

This declining interest has become evident even in the BTC options market.

The put/call ratio on Aug. 20 was 0.72 ahead of the Aug. 21 expiration. This is considered a bearish signal, as a high value for the put/call ratio suggests that traders are buying put options as insurance against a market decline or as a directional bet.

While Bitcoin options open interest expiry shows that nearly 15,900 BTC options contracts expired on Friday, this is not the highest expiry date marked on the chart.

At the end of the month, the amount due on August 28 was 57,800 BTC, and nearly 51,000 BTC contracts will expire on September 25. This expiry time, along with the put/call ratio, suggests that there may be a short-lived short in the market after a total of 15,900 BTC expires, after which institutional interest will also resume.

More recently, the "extreme greed" sentiment has continued in the market, and has lasted the longest. Historically, a continuation of this level will easily lead to a drop in the price of BTC, and as the price collapses, the expiry of open interest will provide traders with more clarity and insight.

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