Cryptocurrency markets are bracing for short-term volatility, with approximately $1.4 billion worth of Bitcoin and Ethereum options expiring today.
With the total notional value of Bitcoin options reaching $1.066 billion and Ethereum options reaching $284.99 million, traders are eyeing expiration as a potential impact on prices.
Analysts predict market shakeout due to option expiration
According to Deribit data, 17,448 Bitcoin options contracts expire on October 4th. The contract has a put-to-call ratio of 0.75 and a maximum pain point of $63,000.
Bitcoin options expiration, Source: Deribit
At the same time, the Ethereum options market is set to expire with 119,599 contracts. The currently expiring Ethereum contract has a put-to-call ratio of 0.68 and a maximum pain point of $2,500.
Read more: Overview of Crypto Options Trading
Ethereum options expiration, Source: Deribit
In options trading, the put-to-call ratio is a sentiment indicator that compares the number of put options traded to the number of call options traded. In this case, Bitcoin’s put-to-call ratio is 0.75, indicating that more call options are traded compared to put options. This suggests bullish sentiment in the market.
On the other hand, Ethereum’s above put-to-call ratio of 0.68 shows that more calls are still being traded than puts, indicating bullish sentiment.
For the layman, a put-call ratio below 1 usually signals bullish sentiment, as more investors are betting on the market’s potential for upside. Conversely, a put-call ratio greater than 1 usually indicates bearish sentiment as more investors are hedging or speculating on a potential decline in the market.
Price impact based on the biggest issues with BTC and ETH
The current market prices of Bitcoin and Ethereum are below their respective biggest problems. BTC is trading at $61,209 and ETH at $2,381. This suggests that if the option expires at these levels, it will generally be profitable for the option holder.
Results for options traders can vary widely depending on the specific strike price and position held. To accurately assess the potential profit or loss at expiration, traders must consider the entire option position along with current market conditions.
Analysts at Greeks.live suggest that further market factors may emerge, impacting the overall trend and influencing traders’ decisions. Therefore, a comprehensive evaluation is essential before drawing any conclusions about options trading.
“Friday’s unemployment rate and non-farm payrolls data, and now the windy A-share market is far less favorable compared to the US stock market. However, the crypto market has a strong correlation with US stocks. “The only connection between A-shares and cryptocurrencies may be that many people are burning through their money speculating in stocks, causing the price of fiat currencies to fall,” they wrote.
Analysts also say the cryptocurrency market is entering a shake-up ahead of a historically strong month. A shakeout is when an otherwise “weak hand” induces a sell based on horrendous market conditions. Geopolitical tensions could further exacerbate the selloff, which continues to escalate.
“Today is going to be a big day. Very important employment figures will be released in the next seven hours that will have a huge impact on the US stock market. Super pumps and heavy dumpers are also available. Israel plans to strike back against Iran today. Bitcoin needs to hold $60,000 to bounce, but if it breaks above $60,000 it could fall quickly to $56,000-$57,000. Yes, the best strategy is to hold your position and not get shaken out,” advised analyst Ash Crypto.
Meanwhile, the cryptocurrency market remains subtly optimistic while the US economic indicators are bullish. The Federal Reserve’s decision to cut interest rates as inflation cools has sparked optimism for riskier assets. Economists expect further rate cuts in 2024, but the outlook remains uncertain. This is because the Fed will continue to exercise its dual mandate of achieving maximum employment and price stability.
Read more: 9 Best Crypto Options Trading Platforms.
Therefore, traders are advised to remain cautious as option expirations have historically often led to short-term instability in the market. Weekends are also important as volatility is often high.
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