The cryptocurrency market is preparing for the expiration of approximately $4.6 billion worth of Bitcoin and Ethereum options. Experts assess that option expiry of this scale will increase volatility. At the same time, this event came after the US elections and the FOMC meeting. These two US macro developments have been the driving forces behind Bitcoin sentiment this week.
Massive options expiry: It will affect cryptocurrency market sentiment!
As you followed on Kriptokoin.com, Donald Trump’s victory triggered a new run in the cryptocurrency market. The leading crypto Bitcoin has reached new highs in a row. However, today is quite critical. According to data from Deribit, 48,794 Bitcoin option contracts worth about $3.7 billion will expire today. The put/call ratio of these contracts is 0.72 and the maximum pain point is $69,000.
Similarly, Ethereum’s options market will end with 294,380 contracts worth $854.88 million. The put/call ratio of Ethereum contracts expiring today is 0.65. Also, the maximum pain point for the cryptocurrency is $2,500.
‘Big investors are already planning!’
Greeks.live’s latest analysis summarised the impact of the recent US election on crypto options contracts expiring today. Analysts note that as the excitement around Donald Trump’s victory waned, the options market closed profit-taking to end the election season. In this context, analysts make the following assessment for cryptocurrency options:
The election market is cooling rapidly. Despite the strong gains in both Bitcoin and Ethereum and the optimistic mood in the crypto market, the options market is visibly closing profit-taking to end the election game.
Greeks.live also notes that Bitcoin doomsday options have fallen below 50%. A doomsday option is added to a contract to allow the issuer or investor to exercise the contract early. Similarly, analysts note that implied volatility (IV) has dropped significantly across all major terms. Analysts say ETH benefited from today’s big gains and declined less than BTC. Meanwhile, major cryptocurrency investors have already started planning. ‘Large investors have started to determine the year-end market and even the spring market next year,’ the analysts add.
Maximum pain point and FOMC interest rate decision
The maximum pain point in options trading is the level at which option holders will suffer the greatest loss. Essentially, it is the price at which the largest number of options (both calls and puts) will become worthless and cause maximum financial ‘pain’ to traders. Meanwhile, the put/call ratio measures market sentiment by comparing the number of put options (bets on price declines) to call options (bets on price increases). According to Deribit, trading volumes surged to an all-time high of $10.8 billion per day on 6 November on the excitement of the election. This came as expectations of a Donald Trump win peaked. This coincided with BTC re-setting an all-time high of $75,100.
Elsewhere, the FOMC decided to cut interest rates by 25 bps. Federal Reserve Chairman Jerome Powell said, ‘it is not our plan to raise interest rates.’ These statements came in an environment where it was recognised that people were still feeling the effects of high prices. More interestingly, the Fed Chairman said he would not resign if asked, aware of Trump’s plans to overhaul US cryptocurrency rules beyond the SEC.
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