Key Insights
- 21,000 BTC contracts and 180,000 ETH contracts are set to expire soon
- The current price rally looks unsustainable
- Greeks.live analysts believe that the mood of traders has changed to negative
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 required to do so. This makes options more flexible than futures, which obliges you to close a position regardless of profit or loss.
The notional value of the 21,000 BTC contracts and 180,000 ETH contracts expiring soon is $630 million and $340 million, respectively.
We are looking into whether their expiration can provoke increased volatility in the market and affect the price of the two largest cryptocurrencies by capitalization.
Traders maintain a wait-and-see attitude
According to Greeks.live, the BTC put/call ratio is holding at 0.41.
The maximum pain point is at $30,250. This is the price at which the asset will bring financial loss to the largest number of holders.
The put/call ratio on Ethereum options is 0.43 and the maximum pain point is $1900.
Greeks.live analysts also noted a sharp change in market sentiment:
The market has been generally negative this week, with sales of July calls almost monopolizing the market volume. As we noted in last week’s analysis, the options data suggests that the rally is clearly unsustainable. Market participants are not particularly optimistic about the subsequent rise,” they commented.
What will happen to the price of BTC and ETH amid the expiration of options?
This week, the price of the main cryptocurrency rose above $30,000 several times. However, attempts to gain a foothold above this level were unsuccessful: at the time of writing, BTC is trading at $29,830.
Ethereum, in turn, again sank below $1900 – at the time of writing, the price of the asset is $1891.
It is quite difficult to predict how the market will behave on the expiration day 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 stop-loss orders or incorrect trading decisions.
Do not forget that the impact of options expiration on the price of the underlying asset is short-term. As a rule, the next day the market will return to its usual state, and strong price deviations will be compensated.