More Than $5 Billion in Bitcoin (BTC) and Ethereum (ETH) Options Expired – What Does It Mean?
The cryptocurrency market is on edge as over $5 billion in Bitcoin (BTC) and Ethereum (ETH) options expired.
Bitcoin options account for $4.25 billion, while Ethereum’s options total $1.01 billion. So far, both assets are likely gravitating toward their respective max pain points.
Despite substantial expiration, some analysts expect volatility to remain tempered. Moreover, traders have focused on the upcoming U.S. election on November 8, anticipating significant implications for the crypto market.
$5,000,000,000 in Bitcoin and Ethereum Options Expired – How Will it Impact?
According to data from a leading crypto options exchange, Deribit, around 62,657 Bitcoin options contracts expired on October 25. The put-to-call ratio is around 0.66, and the maximum pain point is $64,000.
For Ethereum, 403,426 contracts will expire alongside, with a put-to-call ratio of 0.97 and a maximum pain point of $2,600. The “put-to-call ratio” is a valuable metric for trading options. It measures the volume of puts (bets against price rise) to calls (bets on price rise).
A ratio below 1, like Bitcoin’s 0.66, usually indicates a bullish sentiment, with more traders anticipating gains. Bitcoin is trading at $67,705, while Ethereum sits at $2,494. As such, Bitcoin’s price is above its max pain point, while Ethereum’s is below.
Analysts point out that if the assets expire at these levels, Bitcoin contract holders could suffer losses. On the other hand, Ethereum holders may benefit.
Max Pain Theory’s Price Implications
The max pain point theory suggests that as expiration nears, Bitcoin and Ethereum prices might gravitate toward their respective strike prices.
At these points, the most significant contracts (calls and puts) expire worthless. Bitcoin’s current price above its max pain point could potentially see a pullback. Conversely, Ethereum’s position below its max pain point may increase prices, indicating possible profit opportunities.
Surge in Expiring Options and Market Sentiment
This week’s expiration volume marks a notable increase from previous weeks. BeInCrypto previously reported that options totaling $1.4 billion expired during the trading week ending October 4. This milestone was followed by $1.6 billion on October 11 and $1.62 billion on October 18.
This rise to over $5 billion represents a substantial leap, further amplifying market expectations. BloFin Academy analysts observed that implied volatility (IV) also climbs ahead of the November 8 U.S. elections.
“The change in implied volatility first reflects the election’s impact on the expected volatility of the crypto market. Whether it is BTC or ETH options, the implied volatility level of options expiring on November 8 has increased significantly and exceeded that of far-month options,” said BloFin Academy analysts.
They attribute this rise in IV to increased hedging and speculation needs among investors.
Furthermore, the analysts noted that Bitcoin’s “election day option” indicates BTC’s heightened sensitivity to macroeconomic factors. This underscores its potential for more significant price fluctuations around election day.
Nevertheless, the sentiment in October remains conservative, with many investors sitting on the sidelines.
“Interestingly, investors seem to believe there will not be much volatility for the rest of October. As most investors remain cautious ahead of the election, the market shows signs of consolidation. It is reinforcing confidence in pricing lower volatility,” the analysts added.
Excluding the options expiration, policy uncertainty within the U.S. Federal Reserve is significantly influencing the market sentiment. This is because traders evaluate both potential opportunities and risks in this period of high stakes.
