Today's Expiry Could Bring Volatility
Friday marks a crucial day for cryptocurrency markets, with nearly $3 billion in bitcoin (BTC) and ethereum (ETH) options set to expire. Such expirations often trigger significant price swings, prompting traders and investors to closely monitor today’s developments. While markets have recently seen a recovery, dubbed the "Trump rally," it remains uncertain whether the upward trend will continue.
Expiration of Bitcoin and Ethereum Options Worth Billions
According to data from Deribit, 20,815 bitcoin contracts with a notional value of $2.077 billion are set to expire today. The put-to-call ratio stands at 0.83, indicating that traders are selling more long (call) contracts than short (put) contracts. The maximum pain point, the price level causing the most financial losses for option holders, is $98,000, slightly below the current spot price of $99,758.
Simultaneously, 164,330 ethereum option contracts worth nearly $644 million are also set to expire. The put-to-call ratio for ETH options is 0.68, showing a similar trend to bitcoin, with a higher volume of call contracts being sold. This week has been marked by market corrections, with altcoins being impacted more than bitcoin.
Seasonal Factors and Market Expectations
According to Greeks Live, traders are adjusting their positions ahead of the holiday season and seasonal shifts. They noted that trading in block options has increased, with daily averages accounting for over 30%. As the influence of U.S. equities on crypto markets grows, this interconnectedness could become more pronounced during this winter season.
Currently, bitcoin is hovering below the $100,000 mark, while ethereum trades just under $4,000. It remains uncertain whether the market will see a holiday rally or continue its divergent behavior.
Market Makers Exercise Caution, Favor Short-Term Plays
Data from the past two weeks indicate increased caution among market makers. However, there has been a slight rise in implied volatility (IV) for major option terms. Analysts from Greeks Live pointed out that current conditions favor short-term option plays, which can still be cost-effective.
Economic Factors Add Complexity to the Outlook
The option expirations come after a week of notable U.S. economic data. Inflation in November rose to 2.7%, while the core CPI remained at 0.3%. While a Federal Reserve rate cut is widely anticipated, persistent inflation complicates the path toward more relaxed monetary policies. These macroeconomic factors could further influence the short-term dynamics in cryptocurrency markets.
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