Crypto Options Expiry May Lead to Increased Volatility
Get ready for potential price volatility in the cryptocurrency market as approximately $3 billion worth of bitcoin options and $1.8 billion worth of ether options are set to expire on September 29. This date is significant as it marks the end of both the month and the quarter.
Deribit Chief Commercial Officer Luuk Strijers pointed out that options expiry dates, especially quarterly expiries, can result in massive trading volumes and increased volatility, similar to what is seen in traditional finance.
Although the Bitcoin Volatility Index indicates low volatility expectations over the next 30 days, it has slightly increased over the past month. Market makers play a crucial role in amplifying market volatility as they adjust their hedges based on changes in the underlying asset’s price.
‘Amplified Market Volatility’ Expected
According to Strijers, market makers’ actions leading up to options expiry can lead to amplified market volatility. While September’s monthly and quarterly expiry is expected to have a larger price impact than daily or weekly expiries, current conditions may not result in significant market movements.
Bitcoin’s price has remained relatively flat, with a 0.1% increase on Friday to $26,544. Over the past month, the world’s largest cryptocurrency by market cap has experienced a slight decline of 0.4%.
Institutional Players and Their Impact
Institutional participants who use the Deribit derivatives exchange employ advanced strategies surrounding options expiries. These participants aim to manage volatility and hedge their exposure, frequently adjusting their hedge positions. As a result, their actions may impact bitcoin prices and market volatility.
Options are derivative contracts that grant the purchaser the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before a specific expiry date. Investors use options for various purposes, including hedging against unfavorable price movements and speculating on future valuations and volatility.
Hot Take: Crypto Market Braces for Volatility as Options Expire
The impending expiry of bitcoin and ether options on September 29 is expected to bring increased volatility to the crypto market. This quarterly event often leads to substantial trading volumes and market fluctuations. Market makers play a crucial role in amplifying volatility as they adjust their hedges based on price changes. While current conditions may not result in significant market moves, institutional players utilizing advanced strategies could impact bitcoin prices and overall market volatility. As investors navigate options expiries, they aim to manage risk and capitalize on potential opportunities. Keep an eye on the crypto market as it braces for this expiration event.
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