Significant Expiry of Crypto Options Amid Market Decline
This Thursday marks a notable event in the cryptocurrency options market, with nearly 96,000 Bitcoin (BTC) options and 990,000 Ethereum (ETH) options set to expire. The total notional value of these expirations amounts to approximately $6.2 billion for BTC and $3.1 billion for ETH. The BTC options have a Put Call Ratio of 0.68 and a Maxpain point at $61,000, while ETH options show a ratio of 0.51 with a Maxpain point at $3,100.
The crypto market has experienced a significant downturn in volume this week, with Bitcoin and Ethereum prices oscillating at lower levels. This lull has resulted in a sharp decline in Implied Volatility (IV) across all significant terms, with the Dvol index showing a decrease of up to 15% since the Bitcoin halving event. Despite expectations, the halving did not inject the anticipated volatility into the market, leading instead to an acceleration in the selling of options.
Effects of the BTC Halving
The BTC halving, which traditionally precedes increased market activity, has yet to live up to its potential this cycle. Following the event, the implied volatility of BTC plummeted from 75% to 65%, marking a new low since March. This drop is attributed to a stagnant market that not only reduced realized volatility but also suppressed volatility expectations due to a wait-and-see attitude following the release of margins from significant quarterly deliveries.
The subdued market sentiment is further compounded by recent outflows from cryptocurrency Exchange Traded Funds (ETFs) and the persistent cautious stance of major investors following market upheavals. Historical trends suggest a continuation of price weakness for BTC starting from mid-April, making the selling of May calls potentially cost-effective for traders looking to hedge or capitalize on this trend. The high resistance for BTC to return to its all-time highs continues to challenge market optimism.
