How the expiration of $2 billion options will affect the price of bitcoin (BTC)
Date: 2023-07-29 Author: Karina Ziganova Categories: BLOCKCHAIN
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 71,000 BTC contracts and 600,000 ETH contracts expiring in the near future is $2.08 billion and $1.12 billion, 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 the Greeks.live, the ratio of put and call options on BTC is kept at around 0.57.
The maximum pain point is at $29,000. 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 0.37, and the maximum pain point is $1850.
Analysts Greeks.live note that the period of extremely low volatility may soon come to an end:
"Volatility this week remained at an all-time low, and the drop on Monday brought the supply price to its maximum pain point this month. As empirical practice shows, such market conditions will not last long. The monthly expiration has not yet led to a significant change in positions, and whales behave very cautiously from the very beginning. Bears need to be more patient," they commented.
What will happen to the price of BTC and ETH against the background of the expiration of options
The bullish momentum that led bitcoin to a new yearly high has all but come to naught: at the beginning of the week, the price of BTC briefly fell below the $29,000 mark. Since then, the main cryptocurrency has made several attempts to gain a foothold above $29,500, but none of them have been successful.
Ethereum, in turn, has not been able to overcome the $1900 mark - at the time of writing, the price of the asset is $1862.
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.
