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Options for $1.27 billion will 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 19,764 BTC contracts and 196,944 ETH contracts is $1.27 billion and $693 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.

Options traders overestimated the strength of the bulls

According to Deribit, the put to call ratio on BTC remains at 0.46. This means traders are still bullish and the number of calls, or long contracts, is outnumbering the number of 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 located at $66,500. Most contracts were placed at a price above the current one. Holders were counting on a sustainable rally, but Bitcoin did not live up to their expectations.

The put/call ratio on Ethereum, meanwhile, amounts to 0.30, and the maximum pain point is at $3,500.

Greeks.live analysts believe that the current trend is consistent with historical trends. As a rule, the second financial quarter is not characterized by significant asset price dynamics.

“Based on past experience, there is no big market trend ahead of quarterly delivery. The trend in the second quarter of this year is relatively weak, which is consistent with the historical experience of previous years. The trend in the third quarter is also generally unstable, and the end of the third quarter usually marks the point of market recovery,” they wrote.

What will happen to the BTC price during expiration?

Bitcoin’s price has left holders on edge this week, with the asset’s price rising above $67,000 twice amid renewed inflows into spot ETFs before falling below $65,000. At the time of writing, BTC is trading at $64,600, having lost 1.4% over the last 24 hours.

The dynamics of Ethereum are also not very expressive: despite the long-awaited approval of eight spot ETFs and the completion of the SEC investigation into 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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