Bitcoin (BTC) and Ethereum (ETH) are headed for their first December weekly options expiry. The event may add to the market volatility, with the distinct possibility of a new direction after the contracts expire.
Bitcoin (BTC) and Ethereum (ETH) are preparing for more volatility ahead of the weekly options expiry. The December contracts are already setting the pace for prices at the end of 2024. The expiry arrives at a time when the BTC spot price is volatile in the short term, even though it is showing a recovery trend. BTC rallied again to $98,237.17, while still trading at the ‘greed’ sentiment level.
As of December 6, BTC had a weekly options expiry of 23K contracts, with a notional value of $2.3B and maximum pain at $97,000. The put/call ratio of 1.1 suggested a relative balance between long and short positions.
ETH options accrued just $570K for the week but with a put/call ratio of 0.62. The ratio suggests a stronger bullish attitude for ETH, as the price approaches $4,000.
Even without other factors, trading ahead of weekends and options expiry boosts volatility in the short term. For BTC, options expiry also precedes bigger price rallies. The November expiry of $13.6B in options preceded the recent rally to $104,000.
What caused the BTC flash crash to $93,000?
The BTC rally ground to a halt as it endured a worrying flash crash to $93,000. The options expiry event may have added to the volatility. The flash crash liquidated up to $450M in leveraged positions. The event continued on Friday, with a total of $1B liquidations of exposed positions.
Other explanations include rapid liquidation, as well as normalizing the BTC levels to available liquidity. The selling may be due to relatively large put option positions, which would be liquidated at a lower price range.
BTC recovered above $97,000, but may still face price pressures from long positions at a lower price range. One liquidation target holds more than $84M in leveraged positions at $95,322, as well as $73.52M in leveraged positions at $94,011.
The recent volatile price moves may not reflect long-term opportunities, but they are still leading to re-estimations on whether BTC can go higher, or if it has already achieved its cycle peak.
Options trading also gives an outlook on expected performance. The biggest liquidity of call options can be seen at $100,000, followed by a buildup at the $110,000 and $120,000 levels. Those options point to cautious trading for year-end levels.
The most actively traded options expiring on December 27 point to $110,000 as a possible scenario for BTC. | Source: Deribit
BTC price moves in December may be swayed even more by the options set to expire on the 27th. One of the biggest contracts with $229M in notional value is a call option at $110,000. For more cautious traders, the $96,000 and $120,000 call options have almost similar volumes, exploring both the pessimistic and optimistic scenarios.
Will ETH finally show its bullish side?
The bullish options ratio for ETH suggests an expectation for a breakout above $4,000. The $3,600 resistance level has turned into support in the past few days. ETH traders may also attack the accrued short positions, all of which are above the current price. The liquidation heatmap points to $877M in attackable positions.
ETH benefitted from highly active ETF inflows reaching an all-time peak. In the past day, ETF inflows expanded to $428.44M, surpassing the last few months of inflows.
For now, ETH still lags behind BTC in activity and leveraged liquidity. However, the slowdown of the BTC rally may lead to a rollover into ETH in expectation of a breakout.
ETH traded at a spot price of $3,869.86, with trading volumes close to the higher range for the past month. ETH’s performance is also tied to the expectations of an altcoin season, which also involves multiple tokens from the Ethereum ecosystem.
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