The cryptocurrency markets are preparing for significant fluctuations as $17 billion in Bitcoin and Ethereum options are due to expire on Friday.
Summary
- On Friday, over $17 billion worth of Bitcoin and Ethereum options contracts will expire
- The majority of trader holdings are out-of-the-money options, accounting for 82.5% of open interest
- This timing aligns with significant macroeconomic events, likely increasing volatility
The crypto markets are on edge as a significant event approaches. On Friday, October 31, more than $17 billion in Bitcoin and Ethereum options contracts are scheduled to expire on the derivatives exchange Deribit.
In the case of Bitcoin (BTC), 72,716 call option contracts and 54,945 put option contracts totaling $14.4 billion are set to expire on that day. Additionally, $2.6 billion in Ethereum (ETH) options will also be expiring.
With a predominance of calls over puts, traders are anticipating a rise in BTC before expiry. Notably, the maximum pain level for Bitcoin is $114,000, an amount where most options could become worthless. This is crucial, as market makers may adjust positions to pull prices towards this level, especially close to expiry.
There is a distinct tendency among traders for speculative positions, with 82.5% of options contracts being out-of-the-money, indicating a lack of hedging. These contracts are essentially bets on the anticipated future prices of BTC and ETH.
Potential Volatility from Bitcoin, Ethereum Options Expiry
Expiry events for options typically heighten market volatility. They can lead to substantial spot market shifts as traders close out positions and rebalance their portfolios. This effect is notably stronger when a significant portion of options is out-of-the-money.
Moreover, this event coincides with major macroeconomic happenings, such as the FOMC interest rate decision and key company earnings reports. These factors could further escalate short-term market volatility.
