The crypto market is on edge today as a significant number of Bitcoin (BTC) and Ethereum (ETH) options contracts, valued at roughly $1.54 billion, are set to expire. These expiring options are likely to trigger price volatility, keeping traders and investors glued to their screens.
What are Options Expirations and Why Do They Matter?
Options contracts grant the holder the right, but not the obligation, to buy or sell an asset at a specific price by a predetermined date. When options contracts expire, they are settled in cash or exercised, meaning the holder takes possession of the underlying asset.
Large option expirations, like today’s event, can inject uncertainty into the market as large amounts of buy and sell orders are triggered. This can lead to price swings as options contracts are settled or exercised.
Bitcoin Options: A Put-Call Skew Hints at Bearish Sentiment
The expiring Bitcoin options contracts hold a notional value of $1.04 billion, with 18,339 contracts reaching their expiry date. Analysts are paying close attention to the put-to-call ratio, which currently sits at 0.71. This ratio suggests that there are more call options (bets on a price increase) than put options (bets on a price decrease) outstanding.
However, another data point, the maximum pain point of $62,000, paints a different picture. The maximum pain point indicates the price at which the most options contracts would expire worthless. This suggests that many option holders might be anticipating a price below $62,000 by the expiry time. Additionally, skew values, which reflect the pricing difference between call and put options, are leaning bearish, indicating a market sentiment favoring a price decline.
Ethereum Options: A Similar Story with Lower Volatility
Ethereum options expiring today hold a smaller notional value of $501.12 million, spread across 162,782 contracts. The put-to-call ratio of 0.37 suggests a stronger bias towards calls compared to puts. However, the maximum pain point of $3,350 hints at potential price weakness for Ethereum as well.
Also Read: Crypto Bloodbath: Bitcoin Drops 9%, Market Cap Sheds $600 Billion in a Week – What’s Next?
Analysts point out that recent sell-offs by major crypto holders, often referred to as “whales,” have already led to significant losses. Bitcoin is currently trading around $57,000, while Ethereum sits near $3,100. While implied volatility, a gauge of market expectation for price fluctuations, has risen for both Bitcoin and Ethereum, the increase for BTC is slightly higher, suggesting a potentially more volatile expiry for the leading cryptocurrency.
The Coming Hours: Will Options Expiry Ignite Volatility?
The next few hours will be crucial for the crypto market as these options contracts expire. Whether the market experiences significant price swings or manages to absorb the options activity smoothly remains to be seen. With a mix of bullish and bearish signals, traders and investors are advised to closely monitor market movements and exercise caution while navigating this period of potential volatility.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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