Bitcoin and Ethereum Remain Stable During $3.5B Options Expiry

Bitcoin and Ethereum Remain Stable During $3.5B Options Expiry

Bitcoin and Ethereum hold their ground amid hefty options expiration event, with Bitcoin trading at $26,509 and ETH at a jump of 1.6%, while the options market induced uncertainty and traders mostly held bullish positions.

Bitcoin (BTC) and Ethereum have held their ground amid a hefty options expiration event this morning.

The leading digital currency rose 1 percent early Friday morning, while Ethereum (ETH) jumped 1.6%.

Bitcoin (BTC) is now currently worth $26,509, down 11 percent in the previous 30 days. Over that same period, the second- largest digital currency by market capitalization has decreased 4.6%.

Today, Bitcoin (BTC) options on Deribit expired this morning with a notional value of $2.26 Billion and $1.25 Billion for Ethereum (ETH), inducing uncertainty in the market.

Notional value refers to the total number of outstanding option orders in the market that have is still to expire.

The Bitcoin (BTC) options market had a put-to-call ratio of 0.44. Similarly, for Ethereum (ETH), every put option had two call open options opened. This implies that traders mostly held positive  tendency positions, which is likely why the price responded negatively before the expiry.

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An option call contract is a financial derivative that gives the holder the right, but not the obligation, to buy a specific asset—in this case, Bitcoin—at a predetermined price. A put option gives the holder the right to sell.

And once an investor purchases a call option, they are essentially betting that the price of the underlying investment will boost over the strike price before the option expires. The strike price represents the pre-determined price at which the option is bought.

For example, a May call option for a strike price of $27,000 would mean that for the buyer to turn  a profit, the price must be higher than $27,000 at its expiration.

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Usually, the market has a tendency to fluctuate toward maximum pain point next to option expiration. The max pain point for today’s expiration event was $27,000 for Bitcoin (BTC) and $1,800 for Ethereum (ETH), approximately current prices.

The maximum pain point in the options market refers to the price level when options buyers will incur maximum losses.

Bitcoin, Ethereum (ETH) low liquidity takes hold

It was expected that the present low-liquidity market conditions would have exacerbated the impact of the options expiration event.

BTC’s liquidity dried up in Q2 2023 owing to events such as the end of Binance’s zero-fee trading program, the banking crises, and macroeconomic issues like the ongoing debt-ceiling debate in the United States.

Co- founder of cryptocurrency research outlet Jarvis Labs Ben Lilly measured the decline in liquidity using the cumulative volume delta (CVD) metric for spot and futures markets. CVD measures the cumulative change in the volume of buy and sell orders as the price moves.

It’s used to analyze the flow of volume and can provide insights into the strength or weakness of a tendency or price movement.

Lilly found that the spot CVD has declined significantly since mid-April, indicating that traders are not showing any interest in driving the prices higher or lower.

Adding to the options expiration event, Lilly also mentioned that once May contracts expire, the market’s attention will turn  toward June, which are as of now showing a maximum pain level of $24,000 for Bitcoin (BTC) and $1,600 for Ethereum.

“Once this unwind for May takes place and contracts expire, we’re now looking at June and the structure should be changing, which points to a pullback toward $24,000,” wrote Lilly.

Biyond Capital’s lead trader Nathan Batchelor echoed the over analysis.

“In low volume, low liquidity trading conditions such as now it is likewise possible the options actions could drive price volatility,” he informed Decrypt. “Most of the high volume puts are seen around $25,250 so be careful of more downside on Friday if $25,850 is breached.”

Deribit analysts agreed with the likelihood of a bout of volatility according to the historically low reading of short-term implied volatility, which preceded a market rally in January 2023.

Implied volatility is a measure of the market’s expectation of the future volatility or price fluctuations of an underlying asset.

Deribit’s chief commercial officer Luuk Strijers informed Decrypt that while the previous instance resulted in an upside, it “could have been a market tragedy as well.”

He expects the short-term volatility to boost and reduce the difference with longstanding implied volatility to reinstate the sentiment that “lower volatility in Bitcoin (BTC) is here to stay” before traders can confidently begin longstanding accumulation or distribution.


The views and opinions expressed by the author are for informational objectives only and do not constitute financial, investment, or other advice.


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