We rarely write on this topic, but - tomorrow is the expiration of options on BTC and ETH worth $18 billion. This is the largest amount in the entire existence of the #Deribit exchange.
The scale is important, as well as how uncertain #BTC is behaving right now.
Large expirations, in our observation, rarely play a decisive role for volatility and, even more so, for the direction of price movement. But right now, it is worth considering.
Currently, the Max Pain Price level (at which most buyers and sellers of options lose money) for BTC is $85,000, and for Ethereum, it is $3,000. This does not mean that prices will strictly reach these levels by tomorrow, but there is a +1 magnet to go there. It is quite possible that with tomorrow's expiration, the market will gain more certainty in its movement.
The 'explanatory brigade' on options and their expirations for those interested will be at the end of the post, and we want to return to the topic of the Volatility Index of BTC price, giving a new forecast.
Since December 14, we have been saying that we expect a return of volatility growth for BTC on December 18-20. The result - the reversal of the Index occurred on December 18.
The volatility that BTC showed on December 18-20 has been assessed by everyone.
We currently predict that the Volatility Index is already turning into a new downward structure with targets for reducing volatility until January 1-3. The current indicator is 8.03 - also high, and the pace of volatility reduction can vary. But for now, we believe that fluctuations like those on December 18-20 will not be seen in the price of #BTC in the coming days.
More confidence will appear after the close on the Index of today's daily candle. Additional confirmation of the reversal is needed!
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What are options? They are derivative financial instruments that give the right (but not the obligation) to buy or sell an asset (for example, BTC and ETH) at a fixed price until a certain date. Expiration is the day when the option 'ends.' After that, it becomes invalid.
The Max Pain Price mentioned in the post often attracts the asset's price closer to expiration. The closer the expiration day, the greater the chances of sharp price movements; large players can 'pull' the market to Max Pain Price for their benefit.