- Majority of Bitcoin options favor call options with a put-to-call ratio of 0.84, indicating bullish market sentiment.
- Ethereum options also show bullish trends, with a maximum pain point well below the current trading price.
Today the cryptocurrency market has the expiration of $10.95 billion in Bitcoin (BTC) and Ethereum (ETH) options contracts.
This event is highly anticipated by market observers due to the potential for substantial price movements in both currencies.
Options contracts provide investors the opportunity to speculate on the future price of assets. Investors can purchase a “call” option to buy the asset at a set price or a “put” option to sell it at a predetermined price.
As these options near their expiration, many traders tend to settle their positions, often resulting in increased market volatility.
For Bitcoin, the stakes are particularly high with $9.47 billion worth of options set to expire. Data from Deribit, a leading options exchange, indicates that the expiring Bitcoin options predominantly favor call options, with a put-to-call ratio of 0.84. This suggests that the majority of traders are optimistic about Bitcoin’s price increasing.
The “maximum pain point” for Bitcoin is currently around $80,000, a crucial threshold since many options would expire worthless if the price remains above this level.
Despite trading at a much higher price of approximately $96,353, any significant movement towards the $80,000 mark could prompt notable financial adjustments for those involved.
Ethereum’s situation is similar but on a smaller scale, with $1.47 billion worth of options expiring. The put-to-call ratio for Ethereum stands at 0.75, indicating a general bullish sentiment among traders regarding its price.
Ethereum’s maximum pain point is around $2,900, whereas it is currently trading at $3,573, positioning most options to remain out of the money unless there’s a price drop.
“We got an 11% pullback on BTC and people are saying the end is imminent. It was less than 10 days ago when the same people were asking for a pullback to buy,” they wrote. Greeks.live
This substantial expiration of options contracts is likely to induce volatility in the market. Historical patterns suggest that the expiration of large volumes of options contracts can lead to price fluctuations, particularly when combined with lower weekend trading volumes, which can amplify the effects.
“Although the spread is significant, the offer implied volatility is on par with recent 1-month historical volatility, so it’s not overpriced. A 5% spot price increase can offset the spread. I’m prepared to hold until expiration. I bought a batch of call options last night, and the market has made some moves this morning,” Jeff Liang, CEO and co-founder of Greeks.live
The overall market sentiment remains optimistic for both Bitcoin and Ethereum. Many traders are betting on continued price increases, reflecting a bullish outlook in the near term. However, the reality of options expiration could introduce corrective price actions.
“BTC’s ebbing from the $100,000 mark has flattened the ATM volatility term structure, with short-tenor options dipping below 60%. This mirrors a pattern observed since the US election. Lower realized volatility explains the drop. While open interest in calls and puts remains unchanged, demands for short-term options this week have stagnated. ETH options show slightly more bullish sentiment than BTC options. Markets have recalibrated after the post-election high, but call options remain in the lead in both trading volumes and open interests,” Bybit added.
Traders holding these options must remain vigilant and possibly adjust their strategies to mitigate risks associated with potential price corrections.
Furthermore, the broader market sentiment is buoyed by the recent resignation of SEC head Gary Gensler, fostering hope among investors for a more crypto-friendly regulatory environment under new leadership.
Bitcoin (BTC) is currently trading at $96,616 USD, reflecting a 0.92% decrease over the last 24 hours. Over the past month, BTC has gained 33.58%, showcasing strong bullish momentum, with a year-to-date increase of 128.64%.
However, it is experiencing consolidation below its psychological resistance at $100,000 USD, following a recent dip from its all-time high of $99,800 USD.
