The market enters the last days of 2024 with the largest Bitcoin options expiry record in history. A total of $18 billion worth of Bitcoin and Ethereum options contracts will expire today. Cryptocurrency options traders and investors can expect exciting and unexpected developments.
What does the record cryptocurrency option value indicate?
As you have been following on Kriptokoin.com, the market has entered a downward trajectory today. According to Deribit data, the expiry of these Bitcoin options includes 88,537 contracts. This is four times more than last week. Similarly, the total value of Ethereum options contracts expiring today is 796,021, which is 4.5 times higher than the previous week. The total value of expiring Bitcoin options reaches $ 14.38 billion. The total value of Ethereum options is $3.7 billion. As the value of expiring options increases, investors’ profit expectations and hedging demand also increase. For Bitcoin, the maximum strike price of expiring options is $85,000. Also, the put/call (P/C) ratio is 0.69.
Meanwhile, the maximum bitter price of Ethereum options contracts is $3,000. Moreover, the P/C ratio is 0.41, down from 0.97 at the end of October, reflecting the growing bullish sentiment towards ETH.
Maximum pain point for both cryptocurrencies!
Theoretically, a low P/C ratio (below 1) reflects positive sentiment, as more call options (bets on price increases) are bought. It also indicates bullish expectations. However, compared to historical data, Bitcoin’s P/C ratio has been trending upwards throughout the last quarter of the year. This potentially indicates an increase in hedging sentiment. FalconX Research Manager David Lawant comments as follows:
Downside hedging demand has been on the rise for a few weeks, perhaps partly fuelled by players looking to protect their 2024 calendar year performance benchmarks. The put/call ratio of 27 December options open interest has doubled from 0.35 in October to over 0.70 now.
‘Downward movement may trigger a rapid snowball effect!’
Meanwhile, at the time of writing, BTC and ETH are trading at $95,338 and $3,320, respectively. These are also significantly above the maximum pain prices mentioned above. The maximum pain price refers to the price level at which all investors holding options contracts (both call and put options) experience the maximum loss (or ‘pain’) at expiry. Some traders and analysts use the maximum pain price as an indicator to predict potential price directions. This is because markets often gravitate towards this price to optimise the profits of option sellers. Deribit made the following statement on the subject:
Due to the market being heavily leveraged to the upside, a significant downside move could trigger a rapid snowball effect. All eyes are on this expiry to define the narrative going into 2025.
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