On April 5, 18,000 Bitcoin (BTC) and 270,000 Ethereum (ETH) options will expire. The notional value of the Bitcoin and Ethereum contracts is $1.2 billion and $890 million, respectively.
Will this expiration trigger a volatility increase in the market and influence the price of the two largest cryptocurrencies by market capitalization?
It’s important to understand that crypto options allow traders to buy or sell an asset at a specific price on a particular date. This feature provides flexibility to the owner. Unlike futures, they are not obligated to buy or sell.
As per the data from Greeks.live, Bitcoin’s Put Call Ratio currently stands at 0.64. The maximum pain point for Bitcoin is $68,000, which means that this price could lead to significant financial losses for the largest number of holders. Similarly, Ethereum’s Put Call Ratio is 0.8, and its maximum pain point is $3,400.
“The crypto market was weaker this week, with the $70,000 game ending in a short-seller’s win, and selling calls being the most dominant trade of the week, with IVs across all major terms showing a significant decline,” analysts at Greeks.live wrote.
Read more: An Introduction to Crypto Options Trading
This week has been tough for Bitcoin. As BeInCrypto reported earlier, BTC’s price could not stay above $70,000 and fell below $65,000. At the time of writing, BTC is trading at $67,500.
Ethereum showed similar dynamics, with its price falling below $3,250 earlier this week.
Furthermore, the analysts stated that Bitcoin is coming off the halving with sentiment support. Meanwhile, other coins have fallen into a short-term bear market, and ETF inflows have slowed recently as the market is digesting the premium from ETFs.
It is quite difficult to predict how the market will behave on the expiration day of many contracts, especially if any events affect the news background. Still, traders must closely monitor the situation to ensure increased volatility does not lead to unwanted stop-loss orders or poor trading decisions.
Nevertheless, market participants should remember that the impact of option expiration on the underlying asset’s price is short-term.