How the expiration of $630 million options will affect the price of bitcoin (BTC)
Date: 2023-07-23 Author: Karina Ziganova Categories: BLOCKCHAIN, CRYPTO PAYMENTS
A large number of options on Bitcoin (BTC) and Ethereum (ETH) expire today. Let's figure out how this will affect the price of the underlying assets.
Cryptocurrency options are derivative contracts that allow traders to buy or sell an asset at a specific price on a specific expiration date. If the option holder decides not to buy or sell cryptocurrency, he is not obliged to do so. This makes options a more flexible instrument than futures, which oblige you to close a position regardless of profit or loss.
The notional value of 21,000 BTC contracts and 180,000 ETH contracts expiring in the near future is $630 million and $340 million, respectively. Let's figure out whether their expiration will be able to provoke increased volatility in the market and affect the price of the two largest cryptocurrencies by capitalization.
Traders took a wait-and-see attitude
According to Greeks.live, the ratio of put and call options on BTC is kept at around 0.41.
The maximum pain point is at $30,250. This is the price at which the asset will bring financial losses to the largest number of holders.
The put/call ratio in Ethereum options is 0.43, and the maximum pain point is $1900.
Analysts Greeks.live also noted a sharp change in market sentiment:
"This week, the market was generally negative, sales of July calls almost monopolized the market volume. As we noted in last week's analysis, the options data suggests that the rally is clearly unsustainable. Market participants are not particularly optimistic about the subsequent rise," they commented.
What will happen to the price of BTC and ETH against the background of the expiration of options
This week, the price of the main cryptocurrency has risen above $30,000 several times. However, attempts to gain a foothold above this level were unsuccessful: at the time of writing, BTC is trading at $29,830.
Ethereum, in turn, sank below $1900 again — at the time of writing, the price of the asset is $1891.
It is quite difficult to predict how the market will behave on the day of expiration of a large number of contracts. Especially if any events that affect the news background are added to it. However, traders should keep a close eye on the situation so that increased volatility does not lead to undesirable triggering of stop loss orders or making incorrect trading decisions.
Do not forget that the impact of the expiration of options on the price of the underlying asset is short-term. As a rule, the market will return to its normal state the very next day, and strong price deviations will be compensated.
