A huge sum of 102 billion dollars in bitcoin and Ethereum options are about to expire, which should drive volatility in the cryptocurrency market again: 107,000 BTC worth $6.6 billion and $3.6 billion worth of Ethereum.
A huge sum of 102 billion dollars in bitcoin and Ethereum options are about to expire, which should once again drive cryptocurrency market volatility: 107,000 BTC worth $6.6 billion and $3.6 billion worth of Ethereum.
With their impact on price dynamics and investor behavior, options play a pivotal role in the cryptocurrency market. A derivative known as an option gives buyers the right, but not the responsibility, to buy or sell an asset at a fixed price before the contract expires.
Due to traders and investors adjusting their positions, the volume of options scheduled for expiration can cause large price swings. Understanding these market fluctuations requires a special understanding of the idea of maximum pain.
Maximum pain is the price at which the greatest number of options contracts (combined purchases and sales) will expire, resulting in the greatest possible financial loss for option holders. This target is $57,000 for Bitcoin and $3,100 for Ethereum. Due to attempts by market makers to reduce their payouts, the price of the underlying asset often tends to move towards the maximum pain point as the expiration date approaches.
Yuri MolchanThe cryptocurrency market faced difficulties in June, with a more negative outlook as ETH and BTC prices approached their respective peak pain points. Such closeness suggests that many option holders were not prepared for these price levels, considering them unlikely.
As traders liquidate their positions and market makers hedge their exposures, the expiration of such a large volume of options can cause volatility to increase. Another important metric to consider is the put/call ratio.
The ratio for Bitcoin is 0.5, meaning there are more buy options than put options. Ethereum shows a similar trend with a ratio of 0.59. Despite the recent market correction, these ratios point to a general bullish attitude among traders.
