One of the biggest options expiries of the year occurred on May 16 on the cryptocurrency market, when contracts were worth over $3.04 billion in Bitcoin and Ethereum settled at the same time. This could be a turning point for volatility on both assets. The notional value of Bitcoin was $2.76 billion, and a startling 27,000 options expired. The Put/Call ratio, which was at 1.03, indicated that traders were feeling somewhat bearish but generally balanced. 

At $100,000, which is still much higher than the current spot price of about $103,800, the maximum pain point or the price at which most options lose value is located. This suggests that most traders were aiming higher but are now below the market. On a smaller scale, Ethereum's expiration followed a similar pattern. Approximately 220,000 Ethereum options, with a $570 million notional value, expired. With a maximum pain point of $2,300, the Put/Call ratio was even more pessimistic at 1.36.

Since ETH is currently trading at about $2,625, many traders, who have short positions, might be feeling pressured. Delivery is still lacking, though, as only roughly 9% of the entire Bitcoin options position was exercised despite the significant expiry. Despite general optimism, this suggests prudence on the derivatives market. While implied volatility (IV) fell to less than 45%, short- and medium-term realized volatility (RV) for Bitcoin has dropped below 35%, lowering the volatility risk premium (VRP) and suggesting a cooling speculative environment. 

The growing discrepancy between positioning and market sentiment is more intriguing. Technicals and price action paint a more optimistic picture, even though options data indicates short-term hesitancy and bearish positioning. Ethereum has decisively surpassed its 200 EMA, while Bitcoin remains well above major moving averages.

While the expiration of the options may not result in an immediate explosion, it does set the stage. Given that the majority of bearish bets are losing ground and the market as a whole is displaying technical strength, a breakout driven by short covering and a renewed willingness to take risks could happen soon. The real catalyst might be the data from June.