Cryptocurrency markets prepare for a significant shift as $3 billion worth of Bitcoin and Ethereum options reach expiration.
As these large contracts near their end, many wonder how this will impact market volatility.
Volatility Decreases as Major Cryptocurrency Options Expire
Today, approximately $2.34 billion worth of Bitcoin options are set to expire, with a maximum loss of $66,000 and a put to call ratio of 0.58. The number of expiring contracts stands at 36,732, a notable drop from the previous week’s 61,320 contracts.
On the Ethereum front, there are 183,756 contracts expiring, amounting to $577.2 million in notional value. The maximum loss for these contracts is $3,300, with a put to call ratio of 0.55.
Read more: Introduction to Cryptocurrency Options Trading
The primary concern in the cryptocurrency options market is determining the price level that poses the most financial risk to option holders. The put to call ratio suggests a preference for buying options (calls) over selling options (puts).
Greeks.live, a tool for cryptocurrency options trading, offers insights into today’s expiring options. Since the monthly delivery in July, the Dvol index has decreased by almost 15%, from 62% to 48%, indicating a significant dip in market volatility. The current implied volatility (IV) level is the lowest of the year and has dropped below the threshold for the first time in three weeks.
Analysts at Greek Live highlight the diminishing market volatility, attributing it to the smooth progress of key events like the Bitcoin 2024 meeting and the FOMC meeting. However, analyst Adam from Greeks.live notes a lack of market “hot spots,” suggesting that Ethereum exchange-traded funds (ETFs) may need stable positive capital inflows to see significant movement.
“Historical trends indicate a generally bullish season, but with limited short-term opportunities. Now could be a good time to consider purchasing mid- to long-term call options,” he advised.
At the start of the month, Bitcoin was at $66,342, dropped to $62,000 by midnight Asia time today, and is currently hovering around $64,714. Ethereum experienced a more significant decline, falling from $3,317 to $3,097 on August 1 before bouncing back to $3,178.
Learn More: 9 Best Cryptocurrency Options Trading Platforms
Historically, options contract expirations have led to sharp but temporary price fluctuations, with the market typically stabilizing over time. Traders should stay alert, analyze technical indicators, and gauge market sentiment to effectively navigate potential volatility.
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