CoinDesk Report:
With $5.2 billion worth of Bitcoin and Ethereum options set to expire this week, the cryptocurrency market may be preparing for greater volatility.
Considering the price movements over the past two days, the top two ranked cryptocurrencies by market capitalization seem to be heating up in terms of expected volatility. Bitcoin, for instance, dropped from its high point of $69,000 on Monday to $66,848, a decrease of over 3.5%. Ethereum, on the other hand, fell 4.4% from $2,752 to $2,631 at the time of writing.
Will Bitcoin touch the maximum pain point?
It is worth noting that these contracts will expire at 8:00 UTC on Friday. Data from Skew shows that $4.2 billion worth of Bitcoin options contracts are about to expire, with the maximum pain point for these contracts being $64,000. In this context, the maximum pain level is the price that would cause the most significant loss for options traders.
Bitcoin Put/Call Ratio Chart | Skew
According to popular belief, market makers often push prices towards the maximum pain point to reduce the profits of traders. Therefore, volatility in the market tends to increase before option expiration dates.
Meanwhile, the put/call ratio remains at 0.62, indicating a slight bullish sentiment among options traders. Considering Bitcoin’s recent breakthrough of $69,000, bookmakers expect a bullish market sentiment.
It is worth noting that the value of Bitcoin options expiring, which amounts to $4.2 billion, represents 16.26% of the total trading contracts. Surprisingly, 83.74% of the options trades expiring on Friday heavily rely on the price movement of Bitcoin, thereby increasing the expected volatility.
Ethereum approaching maximum pain point
With approximately $1 billion worth of Ethereum options contracts expiring on Friday, the king of altcoins is only 1% away from its maximum pain point. At the time of writing, Ethereum’s trading price is $2,631, while the maximum pain point is $2,600.
It is worth noting that the open interest rate for bearish Ethereum options is 0.95, indicating a bearish sentiment among traders regarding the price outlook. The open interest for bearish contracts is almost equal to that of bullish contracts, with 194,050 and 205,155 respectively.
Furthermore, the dominant bearish sentiment regarding Ethereum’s price reflects its underperformance compared to other high-quality assets. In the past 30 days, Ethereum has only experienced a 2.07% increase, making it the worst-performing cryptocurrency among the top five by market capitalization.
Earlier, Matt Hougan, Chief Investment Officer at Bitwise, noted that Ethereum is the best bet against the crypto market this year. The executive stated that the bearish sentiment surrounding the asset is the reason for its poor price performance. However, he anticipates a rebound for Ethereum by 2025.
