How the expiration of $880 million options will affect the price of bitcoin (BTC)
Date: 2023-07-08 Author: Karina Ziganova Categories: BLOCKCHAIN
A large number of Bitcoin (BTC) options will expire soon. Let's figure out how this will affect the price of the underlying asset.
Bitcoin options are derivative contracts that allow traders to buy or sell BTC at a specific price on a specific expiration date. If the option holder decides not to buy or sell the asset, 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 the 29,000 contracts expiring in the near future is $880 million.
Traders hope for a continuation of bitcoin's bullish rally
According to the Greeks.live, the ratio of put and call options on BTC is kept at around 0.76. This means that market participants are still bullish and expect further growth in the price of the asset.
The maximum pain point is at around $25,000. This is the price at which the asset will bring financial losses to the largest number of holders.
Analysts Greeks.live also noted that the situation in the crypto market may change radically in the near future.
"Volatility has continued to rise this week, and despite several positive stimulus, such as Hong Kong's announcement of creating its own stablecoin, the current rally has clearly been volatile. In the long run, decreasing volatility now seems like an inevitable trend," they commented.
What will happen to the price of BTC against the background of the expiration of options
Yesterday, the price of bitcoin soared to a new annual high and overcame the $31,500 mark. However, attempts to gain a foothold above this level were unsuccessful: over the past 24 hours, the main cryptocurrency sank by 3.5% and at the time of writing is trading at $30,045.
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.
