The Impact of Options Expiry on Bitcoin and Ethereum Prices
Following the expiration of significant options contracts for Bitcoin (BTC) and Ethereum (ETH), the cryptocurrency market has experienced increased activity and volatility.
On December 20th, around 21,000 BTC options with a value of approximately $2.04 billion expired, alongside 173,000 ETH options valued at $590 million.
Bitcoin’s Put-Call Ratio indicated a bullish sentiment at 0.87, while Ethereum’s ratio of 0.5 signified a more optimistic outlook among traders.
The max pain levels for Bitcoin and Ethereum were recorded at $101,000 and $3,750, respectively. Presently, Bitcoin is trading at $95,202.42, and Ethereum at $3,289.44, both below their respective max pain thresholds.
After such contract expirations, short-term volatility typically ensues as traders make adjustments to their positions in response to market stabilization post-expiry.
Recent Price Movements for BTC and ETH
In the last 24 hours, Bitcoin has experienced a 6.41% decline, while over the past week, the decrease stands at 5.10%, leading to a market capitalization of $1.88 trillion. Ethereum, on the other hand, witnessed a more significant drop with a 10.50% decrease in 24 hours and a 15.61% decline over the week, resulting in a market cap of $396.41 billion.
The failure of Bitcoin to surpass $110,000 and the subsequent correction have been key factors influencing the current price trends.
Recent reports suggest that earlier this month, the expiry of Bitcoin and Ethereum options contracts worth $3 billion drove substantial market activities. Bitcoin, in particular, had $2.1 billion in expiring options, a Put-Call Ratio of 0.83, and a max pain level of $98,000.
These expirations have played a role in shaping the current market conditions and trends.
ETF Outflows and Increasing Options Activity
As Christmas and year-end approaches, ETFs are witnessing heightened outflows, contributing further to market fluctuations. Market makers have been adjusting their positions to accommodate the high volume of expiring options, with block call options representing over 30% of daily trading volumes recently.
It is anticipated that the expiration of more than 40% of crypto options at year-end will significantly reduce implied volatility. Traders are closely monitoring these developments, as decreased volatility may make options trading more cost-effective in the short term.
“The saving grace could be just tons of options expiring worthless tomorrow,” remarked a user on X.
Bitcoin’s price has stabilized around $95,000 after crossing below the $100,000 mark for the first time in a fortnight. Analysts are eyeing a potential recovery towards $100,000 as the market adapts to post-expiry dynamics.
While Ethereum remains under its max pain level of $3,750, trading at $3,289.44, both assets have been affected by the broader correction. Nevertheless, historical patterns suggest a stabilization in prices in the upcoming sessions as traders adjust to the new price norms.