18,000 Bitcoin Options Set to Expire Amid Market Volatility

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The cryptocurrency market is gearing up for a significant moment as 18,000 Bitcoin options contracts come up for expiry on July 5, with a formidable notional value approaching $1 billion.
This week’s options expiry event, while notable, is smaller in scale compared to the major quarterly contracts expiry witnessed last Friday.
The current put/call ratio for these Bitcoin options is 0.65, indicating that nearly double the long (call) positions are expiring compared to the shorts (puts), reflecting a market sentiment skewed towards bullish bets.

Discover the implications of upcoming Bitcoin options expirations and how the market sentiment is shaping up amid recent volatility.

An Eye on Bitcoin Options Expiry

The cryptocurrency market is closely watching as 18,000 Bitcoin options contracts are set to expire on July 5, representing a notional value of approximately $1 billion. The put/call ratio, a critical indicator for market sentiment, stands at 0.65. This means that there are significantly more call options, indicating bullish sentiment, despite recent market downturns.

Significance of Max Pain Point

The max pain point for these expiring options is $61,500, a level well above the current spot price after a sharp market correction. This price is significant as it marks the level where the maximum number of options will expire worthless, causing substantial losses for the holders. With open interests still showing high values at elevated strike prices—$532 million at $90,000 and $665 million at $100,000—markets remain speculative yet pessimistic, as indicated by the rising open interest at lower strikes.

Volatility and Market Reactions

Crypto derivatives experts have noted increased implied volatility (IV), particularly for Bitcoin and Ethereum as their options approach expiry. This rise in IV is a common reaction to the heightened uncertainty and big market moves, making it a lucrative environment for institutional sellers to either hedge or speculate. Market observers, such as Greeks Live, comment on the higher IV for shorter maturities, reflecting immediate market concerns and bearish sentiment.

Ethereum Options and Market Consequences

In addition to Bitcoin, a substantial amount of Ethereum options are also due to expire soon, with 164,000 contracts carrying a notional value of $470 million. The put/call ratio for these is notably lower, at 0.36, indicating an even stronger bullish sentiment compared to Bitcoin. However, the max pain point of $3,350 also underscores the potential for substantial losses amid the prevailing bearish market.

Crypto Market Outlook

The overall cryptocurrency markets have been heavily impacted, reaching their lowest levels since late February. Total market capitalization took a significant hit, dropping 8.6% in a single day to stand at $2.08 trillion. Glassnode data reflects $675 million in liquidations over the past 24 hours alone. Bitcoin’s price plunged 7%, dipping below $54,000, influenced by Mt. Gox redemption transfers and actions by the German government. Ethereum suffered even more, plummeting 10% to $2,850, exacerbated by broader market sell-offs.

Conclusion

This week’s Bitcoin and Ethereum options expiries are set against a backdrop of significant market volatility and bearish sentiment. With high notional values and open interests hovering around key strike prices, the crypto market is poised for potential further turbulence. Investors and traders should keep a close eye on these developments to navigate the shifting landscape and manage risk accordingly.