How the expiration of $770 million options will affect the price of bitcoin (BTC)
Date: 2023-07-15 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 the upcoming 25,000 BTC contracts and 176,000 ETH contracts is $770 million and $355 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 0.56.
The maximum pain point is at around $30,500. 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 0.66, and the maximum pain point is $1900.
Analysts Greeks.live also noted that, judging by market sentiment, most traders are not going to profit from the current rally.
"Options positions and volumes have been well below average this week, and the market is relatively fragmented. Many whales are waiting for changes in the market after opening large positions earlier this month, and this week's trading is more focused on correcting positions. The current number of calls exceeds the puts by 2-3 times, so as soon as the uptrend begins, the existing option pattern will be broken," they commented.
What will happen to the price of BTC and ETH against the background of the expiration of options
Yesterday, the price of bitcoin soared to a new annual high and overcame the $31,800 mark. However, attempts to break above this level were unsuccessful: after a short-term impulse, the main cryptocurrency returned to the $31,300 mark.
Ethereum, in turn, added 7.1% in price and broke through the key resistance of $2000 - at the time of writing, the asset is trading above this level.
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.
