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$1.4 billion worth of options expire today

A large number of Bitcoin (BTC) and Ethereum (ETH) options are expiring today. Let's figure out how this will affect the price of underlying assets.

Cryptocurrency options are derivative contracts that allow traders to buy or sell an asset at a specific price on a specific expiration date. If the option owner decides not to buy or sell cryptocurrency, he is not obligated to do so. This makes options more flexible than futures, which require you to close a position regardless of profit or loss.

The notional value of the soon-expiring 21,045 BTC contracts and 353,893 ETH contracts is $1.4 billion and $1.34 million, respectively. We are looking into whether expiration can provoke increased volatility in the market and affect the price of the two largest cryptocurrencies by capitalization.

All eyes on Ethereum

According to Deribit, the BTC put to call ratio is holding at 0.88. This means traders are still selling more calls, or long contracts, than puts, or short contracts. The maximum pain point – that is, the price at which the asset will cause financial losses to the largest number of holders – is at $67 thousand.

Ethereum put/call ratio amounts to 0.57, and the maximum pain point is at $3,200.

Analysts Greeks.live note that the anticipation of the SEC's verdict regarding spot ETFs on Ethereum significantly influenced the market.

“BTC, as expected, retreated amid very strong support for the ETH price. However, the current weighted implied volatility of ETH is still above 100%, while the same indicator for BTC is only 50%. The main reason for this rare occurrence, of course, was the uncertainty surrounding ETF approval. Judging by the structure of positions on the market, the current level of divergence has already exceeded what it was during the transition of ETH to PoS. Thus, it is man-made politics that is the biggest uncertainty,” they share.

What will happen to the BTC price during expiration?

This week, the price of Bitcoin rose to $72,000 amid renewed inflows into spot ETFs. However, the asset was unable to hold its position and open itself up for a new rally. At the time of writing, BTC is trading at $67,500, having lost 2.7% in the last 24 hours.

The dynamics of Ethereum are also not very expressive: despite the long-awaited approval of eight spot ETFs on ETH, the second largest cryptocurrency by capitalization still cannot return to $4,000.

It is quite difficult to predict how the market will behave on the expiration day of a large number of contracts, especially if any events are added that affect the news background. However, traders need to closely monitor the situation to ensure that increased volatility does not lead to unwanted stop loss orders or poor trading decisions.

We should not forget that the impact of option expiration on the price of the underlying asset is short-term in nature. As a rule, the very next day the market will return to its normal state, and strong price deviations will be compensated.

Source: Cryptocurrency

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