Major Market Volatility Expected as $2.4B Worth Bitcoin and Ether Options Set for Expiry
Summary:
Bitcoin (BTC) and Ether (ETH) options contracts totaling $2.4 billion are poised to expire on May 3, a development that may incite considerable market volatility. The expiry of these derivatives has historically caused temporary turbulence in the crypto market prices. Bitcoin's put-to-call ratio stands at 0.50 with a maximum pain point of $61,000, while Ether's equivalent ratio is at 0.37 with a pain point of $3,000. This all occurs amid market stresses that pushed Bitcoin's price below the $60,000 mark, and Ether's price below $2,900.
In a move expected to stir up significant market turbulence, Bitcoin (BTC) and Ether (ETH) options contracts valued collectively at $2.4 billion are slated for expiry on May 3. A Bitcoin options contract is essentially a financial instrument enabling investors to bet on the future price of Bitcoin, without having to actually own the cryptocurrency. There are two main types of options - call and put options. Call options grant investors the privilege to purchase a cryptocurrency at a fixed price prior to a specified expiry date, while put options allow investors the option to sell a cryptocurrency at a certain price before the contract expires.
The put-call ratio is often employed by investors as a means to gauge the overall market sentiment. A market flush with more puts than calls is indicative of bearish sentiment, whereas a market bursting with more calls than puts points to bullish sentiment. A put-to-call ratio (PCR) below 0.7 is considered indicative of a strongly bullish outlook, while a PCR greater than 1 signifies bearish market conditions.
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There are a total of 23,367 Bitcoin contracts, amounting to $1.39 billion, that are due for expiry on May 3.
As per the data from the Derbit exchange, the put-to-call ratio for Bitcoin options contracts currently stands at 0.50, with the maximum pain point pegged at $61,000. The maximum pain point represents the price level at which the most number of holders stand to suffer financial losses.
Similarly poised for expiry on the same day are 334,248 Ether contracts, with a nominal value of $1 billion. The expiring contracts have a put-to-call ratio of 0.37, with the maximum pain point determined to be $3,000.
The expiration of options contracts has traditionally triggered short-term price instability in the spot crypto market. Over the recent weeks, both Bitcoin and Ether have been subjected to bearish stress. Bitcoin's price sunk below the $60,000 mark, signalling a significant near 20% weekly correction post-halving, while Ether's price slipped below $2,900. However, it's characteristic of the crypto market to recover from an options-led volatility within days of the contracts' expiry.
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Published At
5/3/2024 1:39:06 PM
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