The majority of Bitcoin options traders favor call options with a put-call ratio of 0.84, indicating bullish market sentiment.
Ethereum options are also trending higher, with the maximum pain point well below the current strike price.
In the cryptocurrency market, $10.95 billion worth of Bitcoin (BTC) and Ethereum (ETH) option contracts expired today.
This event is eagerly awaited by market watchers due to the potential for significant price movements in both currencies.
Options contracts offer investors the opportunity to speculate on the future price of assets. Investors can purchase a "call" option to buy the asset at a specified price or a "put" option to sell the asset at a predetermined price.
As these options approach expiration, many investors tend to close their positions, which often results in increased market volatility.
Source: Deribit
For Bitcoin, the stakes are particularly high, with $9.47 billion worth of options expiring. Data from Deribit, a leading options exchange, shows that expiring Bitcoin options are mostly favored over call options and have a put-call ratio of 0.84. This suggests that most traders are optimistic that Bitcoin’s price will rise.
Source: Deribit
The "maximum pain point" for Bitcoin is currently around $80,000, a critical threshold as many options will become worthless if the price stays above this level.
Although it is trading at a much higher price of around $96,353, a significant move towards the $80,000 level could lead to major financial adjustments for those involved.
Ethereum’s situation is similar but on a smaller scale, with $1.47 billion worth of options expiring. The put-to-call ratio for Ethereum stands at 0.75, indicating a general bullish sentiment among investors regarding its price.
While Ethereum’s maximum pain point was around $2,900, it is currently trading at $3,573, meaning most options remain out of the money unless there is a price drop.
“We had an 11% pullback in BTC and people are saying the end is near. It was less than 10 days ago when the same people were requesting a pullback to buy,” they wrote. Greeks.live
This significant expiration of options contracts is likely to cause market volatility. Historical patterns suggest that expirations of large volumes of options contracts can lead to price swings that could amplify the impact, especially when combined with lower weekend trading volumes.
“While the spread is significant, the implied volatility of the quote is on par with the historical volatility over the last month, so it is not overpriced. A 5% spot price increase could offset the spread. I am prepared to hold until expiration. I bought a bunch of call options last night and the market made some moves this morning,” Jeff Liang, CEO and co-founder of Greeks.live
The overall market sentiment remains bullish for both Bitcoin and Ethereum, with many investors betting on continued price gains reflecting an upward trend in the near term. However, the reality of options expiration could lead to corrective price action.
“BTC’s pullback from $100,000 has flattened the ATM volatility term structure, with short options falling below 60%. This reflects a pattern observed since the US elections. Lower realized volatility explains the decline. While open interest in calls and puts has remained stable, demand for short options has been subdued this week. ETH options are showing slightly more optimistic sentiment than BTC options. Markets have recalibrated after the post-election peak, but call options continue to lead in both trading volumes and open interest,” Bybit added.
Investors holding these options should exercise caution and adjust their strategies to mitigate the risks associated with potential price corrections.
Additionally, the recent resignation of SEC chairman Gary Gensler raises hope among investors for a crypto-friendly regulatory environment under new leadership and strengthens overall market sentiment.
Bitcoin (BTC) is currently trading at $96,616, reflecting a 0.92% drop over the last 24 hours. Over the past month, BTC has shown strong bullish momentum, gaining 33.58% and is up 128.64% year-to-date.
However, after the recent decline from the all-time high of $99,800, it is consolidating below the psychological resistance of $100,000.