Market Volatility Increases as Bitcoin and Ethereum Options Expiry Nears
As the expiration date for $1.86 billion worth of Bitcoin (BTC) and Ethereum (ETH) options approaches, cryptocurrency market volatility has significantly increased. This surge in volatility can be attributed to lower-than-expected U.S. Consumer Price Index (CPI) data, which has caused a strong reaction in the market, prompting traders to brace for possible price swings as the expiry date draws near.
Analysis of Bitcoin and Ethereum Options Expiry
According to Deribit, approximately $1.4 billion worth of Bitcoin options are set to expire, with the largest pain point at $59,500. This batch of options consists of 24,383 contracts, down from 31,615 contracts the previous week. The put-to-call ratio stands at 0.83, indicating a slightly bearish market sentiment.
For Ethereum, $471.79 million worth of options are expiring, covering 183,821 contracts, down from 206,626 contracts in the previous week. The primary pain point for Ethereum options is at $2,650, with a put ratio of 0.80, indicating a cautious outlook from traders.
Market Analysis and Outlook
Analysts at Greeks.live are closely monitoring market conditions leading up to the expiry. They note that the U.S. consumer price index (CPI) data for July came in lower than expected, reaching its lowest level since March 2021. Speculation has arisen that the Federal Reserve may cut interest rates in September, with expectations centered around a 25 basis point cut.
Furthermore, following the implementation of the ETF, Ethereum’s price weakened and continued to decline, with a slight rebound later on. Short-term implied volatility (IV) also decreased, creating a bias in favor of put options.
“This kind of decline in implied volatility is relatively rare in the options market, and institutional sellers have essentially been able to profit from this bear market to cover their hedging losses from high volatility over the past month. Now the term structure is back in With a solid structure, that is, well above near low, the market should stabilize for the time being and the profit and loss from selling mid-term options looks better than it does now.
Currently, Bitcoin has dipped to $57,255 from nearly $60,000 prior to the CPI data release, while Ethereum dropped from $2,751 to $2,534. The current trading price for Ethereum is at $2,562.
Post-Expiry Market Expectations
Historically, the expiration of options contracts has often led to rapid but temporary price movements in the cryptocurrency market. As traders prepare for these movements, uncertainty and volatility can be experienced. However, the market typically stabilizes shortly after the expiry, providing a sense of normalcy once the initial impact subsides.
