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Ethereum and Bitcoin options valued at $8.7 billion are about to expire on the leading derivatives exchange, Deribit. This development could increase the volatility of both cryptocurrencies amid the ongoing bearish outlook of their prices.
Ethereum and Bitcoin options max pain level
In a new update, Bitcoin accounts for the largest proportion of the exposure with a total of $7.7 billion in notional options. Ethereum, on the other hand, has approximately $975 million in options. Both coins have their "max pain" level at $75,000 and $2,200, respectively.
Notably, this max pain level is where the most options expire, worthless, with buyers losing the most money while sellers win. This pending expiration is likely to increase short-term volatility for these coins.
Traders aware of this huge volume of options expiring could push the price by liquidating over-leveraged long positions. If this happens, the price of BTC and ETH might experience a dip before bouncing near the settlement level.
Bitcoin, in the last 24 hours, has fluctuated between a low of $66,004.69 and a high of $68,288.42. As of this writing, Bitcoin is changing hands at $66,137.33, which is a significant 2.95% decline within the period.
The asset’s trading volume has also suffered a decline by 22.94% to $43.38 billion. This suggests bearish sentiment is dominating the market as the options expiry closes in on traders.
Ethereum is down by 4.87% to exchange hands at $1,962.82 within the same time frame, with volume plunging by 25.67% to $23.19 billion. Ethereum’s market is in a clear downtrend as the coin is clearly oversold, but strong bearish momentum persists.
Can institutional flows offer counterweight to bearish outlook?
The volatility that today’s option expiry has sparked could ultimately serve to reset the market as investors reassess their positions. This might act as a catalyst for a subsequent breakout in the coming weeks, as many weak hands would have exited.
Despite current volatility concerns, CryptoQuant analyst J.A. Maartunn believes that on-chain data for the two leading cryptocurrencies show that the market is healthy. Maartunn noted that although Bitcoin is trading below investors’ expectations, the coin boasts institutional adoption via ETFs.
This might explain the recent $150 million buyback action of BlackRock of both Bitcoin and Ethereum from Coinbase. The move comes after the asset management firm had consistently offloaded the assets earlier in the month. Some speculate it could signal a positive price outlook ahead.
Dan Burgin
Vladislav Sopov
