At the end of this week, an unprecedentedly large package of options on Bitcoin (BTC) and Ethereum (ETH) will expire. In total, this concerns contracts worth more than 24 billion dollars, all concentrated on one date: next Friday. The market is holding its breath, because the impact on the price could be significant.
Bitcoin options reach record levels
According to figures from crypto exchange Deribit, shared by analyst Rekt Fencer, the largest option expiration in Bitcoin history will expire on Friday. In total, this concerns $24 billion in BTC and ETH options.
Investors are betting heavily on a price rise towards $100,000, while counterparties are trying to defend the zone around $85,000 with put options. The so-called put-call ratio is 0.37, which indicates a strong bullish sentiment: there are many more calls than puts.
It is striking that more than half of all open BTC options on Deribit expire. As a result, a large part of the accumulated risk in the market disappears in one fell swoop.
What are calls and puts?
A call option gives you the right to buy an asset, such as Bitcoin, at a pre-agreed price. If the price rises above that, you make a profit. If the price falls, you only lose the premium paid. A put option works the other way around: you get the right to sell an asset at a fixed price. This is profitable if the price falls.
Crucial price levels for Bitcoin and Ethereum
The ‘max pain’ level for Bitcoin is around $96,000. That is the price at which option holders lose the most on average, while option sellers profit the most. For Ethereum, this level is approximately $3,100.
Analyst Rekt Fencer calls $96,000 a crucial point. If the price closes above it, it could strengthen the positive momentum. If BTC remains below this level, the chance of uncertainty increases.
At the time of writing, Bitcoin is at $87,500 and Ethereum at $2,965. Both prices are therefore still below the expected pain point.
Dealers try to ‘fix’ the price
According to analyst Nic, it is likely that options dealers are trying to move prices towards the max pain level. This strategy, also called ‘pinning’, increases the chance of price movements towards $96,000 and $3,100 in the coming days.
Source: https://newsbit.nl/markt-in-spanning-24-miljard-aan-bitcoin-en-ethereum-opties-loopt-af/
