The US stock market is about to hit an insane milestone today: $6.6 trillion in options contracts will expire, the largest in history, and it’s not even close. For context, the previous record from December 2020 was $4.8 trillion.
So what happens when this much money is on the table? Volatility and chaos that could destabilize crypto markets some more.
Source: The Kobeissi Letter
The Nasdaq is already down over 6% in just five days. The Volatility Index, or $VIX, has doubled this week. Investors are bracing for impact as the US stock market hits what’s called a “triple witching day.”
That’s when stock options, stock index futures, and other derivatives all expire at once. Historically, these days don’t end well for stocks. And negative returns have been the norm over the last decade.
Stocks are trembling under pressure
The Dow barely managed a 0.04% gain yesterday, but the S&P 500 slipped 0.09%, and the Nasdaq took a bigger hit, down 0.47%. Tech stocks are dragging the market lower. And the Federal Reserve’s hawkish cut and sky-high inflation aren’t helping anyone sleep better.
Let’s talk numbers. Total market capitalization for US stocks has hit $59 trillion, double the size of the country’s GDP. According to SpotGamma, calls have been crushing puts leading up to today.
Earlier this week, the call-to-put ratio was 10 to 1. Even with the market taking a beating in the last few days, calls still dominate. That imbalance? It’s like lighter fluid on a bonfire.
Crypto braces for the fallout
Meanwhile, Bitcoin is already having a tough time. It has crashed to around $95,000 from an all-time high of $108,000 in just two days.
Ethereum? Down 7.5%. Solana? A nasty 6.4% drop.
Here’s the deal: heightened volatility in stocks often leads to turbulence in crypto. Why? Because investors treat crypto as a risk asset. If stock traders panic-sell, some of that fear flows into Bitcoin and altcoins.
Liquidity dries up, and prices swing wildly. And as we’ve seen this year, the correlation between these markets has grown even higher.
Between December 2023 and January 2024, Bitcoin consolidated between $39,000 and $46,000 before exploding to $66,000 in March. Right now, it’s moving between $88,000 and $102,000. Analysts are watching the $88,000–$90,000 zone closely.
If Bitcoin dips below that range, a steeper correction could be on the cards. And let’s not ignore the bearish signals. On weekly charts, Bitcoin’s relative strength index (RSI) is showing lower highs while the price shows higher highs.
That’s classic bearish divergence, and it’s the same setup we saw in 2021 before Bitcoin crashed from $69,000 to $15,000. If history repeats itself, crypto traders could be in for a rough ride.
Long-term support levels aren’t looking too hot either. Analysts are eyeing the 50-week exponential moving average (EMA) around $66,600 as the next major line in the sand. If that doesn’t hold, Bitcoin could slide to $57,000—the 0.786 Fibonacci retracement level.
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