Get ready for a wild ride in the crypto market! With a massive $15.2 billion options expiry looming on Friday, Bitcoin (BTC) and Ether (ETH) are poised for significant upward volatility, according to industry experts. This quarterly event on Deribit, the world’s leading crypto options exchange, could trigger a price surge for both leading cryptocurrencies.
Breaking Down the Numbers:
The upcoming expiry represents one of the largest in Deribit’s history, encompassing a whopping $9.5 billion in Bitcoin options alone. Notably, a significant portion (41%) of these expiring options are “in-the-money” (ITM) for Bitcoin. This means their strike price is lower than the current market price, making them profitable for holders. Similarly, 15% of Ether’s expiring options are ITM.
Why This Matters:
Luuk Strijers, Deribit’s Chief Commercial Officer, highlights the potential impact of these ITM options. As they expire, they could inject upward pressure into the market. Imagine this: an investor holds a Bitcoin call option with a strike price of $60,000, while the current market price sits at $70,000. This ITM option allows them to purchase Bitcoin at a discount, leading to a guaranteed profit. With a large volume of such options expiring, the overall demand for Bitcoin could rise, potentially pushing the price even higher.
Max Pain vs. Upward Trajectory?
The options market also uses a concept called “max pain,” which indicates the price point where option buyers experience the most significant losses. Interestingly, the max pain for both Bitcoin and Ether is currently positioned significantly lower than their market prices – $50,000 for BTC and $2,600 for ETH. This suggests that market makers might be strategically hedging their positions to profit from options expiring “out-of-the-money” (OTM).
However, history suggests a different outcome. During previous bull runs, Bitcoin and Ether often witnessed price corrections leading up to the expiry, only to resume their upward climb afterwards. This pattern could repeat itself this time around. As the expiry removes the downward pressure exerted by the max pain level, prices could experience a bullish swing.
Volatility on the Horizon:
While the overall sentiment leans towards a potential price increase, experts anticipate a period of heightened volatility. David Brickell, head of international distribution at FRNT Financial, explains that dealer hedging activities could play a role. As the expiry approaches, dealers might engage in delta-hedging to maintain market neutrality. This hedging process could involve buying or selling Bitcoin or Ether depending on the option contracts they hold, potentially causing price fluctuations around the $70,000 mark for Bitcoin.
Buckle Up for a Crypto Rollercoaster
The upcoming options expiry presents a unique opportunity for the crypto market. With a large sum of ITM options and the removal of the max pain “anchor,” Bitcoin and Ether could witness a significant price surge. However, expect some volatility along the way as dealers manage their positions. This is a pivotal moment for crypto investors, so fasten your seatbelts and prepare for an exciting ride!
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoasset