18,000 BTC contracts and 270,000 ETH contracts will expire soon. The total value of the expiring options exceeds $2 billion. Options traders’ sentiment turns bearish amid a drop below $70,000.
A host of Bitcoin (BTC) and Ethereum (ETH) options expire today. Let’s find out how this will affect the price of the underlying assets.
Cryptocurrency options are derivative contracts that allow traders to buy or sell an asset at a specific price on a specific expiration date. If the option owner decides not to buy or sell cryptocurrency, he or she is not obligated to do so.
This makes options more flexible than futures, which require you to close a position regardless of profits or losses.
Bears Dominate the Options Market
The face value of the 18,000 BTC contracts and 270,000 ETH contracts that will soon expire is $1.2 billion and $890 million, respectively.
Could options expiration cause greater volatility in the market and affect the price of the two largest cryptocurrencies by capitalization? According to Greeks.live, Bitcoin’s put/call ratio remains at 0.64. The maximum critical point, that is, the price at which the asset will cause financial losses to the greatest number of holders, is $68,000.
Ethereum’s put/call ratio is 0.8, and the maximum pain point for ETH is at $3,400.
“The cryptocurrency market was weaker this week, with the $70,000 battle ending with shorts winning and call selling becoming the dominant trade, with IV showing significant declines across all major terms…Bitcoin is approaching the halving on a positive note, other currencies are stuck in a short-term bear market and inflows into ETFs have slowed recently as the market digests the ETF premium,” the analysts commented.
What Will Happen to the BTC and ETH Price during Expiration?
Last week was not a successful one for Bitcoin: the asset failed to stay above $70,000 and briefly fell below the leading $65,000. Currently, the price of Bitcoin stands at $67,500. Ethereum showed similar dynamics, falling below $3,200.
It is quite difficult to predict how the market will behave on the expiration day of a large number of contracts, especially if events are added that affect the background of the news.
However, traders should closely monitor the situation to ensure that increased volatility does not lead to unwanted stop loss orders or poor trading decisions.
It is important to remember that the impact of option expiration on the price of the underlying asset is short-term. As a general rule, the next day the market will return to its normal state and strong price deviations will be compensated.
Halving Will Be Definitive to Boost the Price of Bitcoin
Some predict Bitcoin will reach $200,000. However, according to PlanB, that figure could fall short. From S2F’s perspective, he is looking for a significantly above-average target, possibly exceeding $500,000, to align with the model’s projections.
A key factor reinforcing this optimistic outlook is the performance of on-chain indicators, such as realized price and two-year realized price, which demonstrate notable growth during bull markets. The five-month realized price, in particular, establishes a strong new support level at $60,000.
VanEck Predicts Ethereum L2 Networks Will Reach $1 Billion Valuation
VanEck, a leading investment management firm, has projected a monumental $1 trillion valuation for Ethereum Layer 2 (L2) networks by 2030. This bold forecast highlights the important role L2 solutions play in the scalability of the Ethereum network, addressing its main scalability challenges.
If VanEck’s prediction comes true, it would mean a nearly 4x increase in the valuation of L2 solutions over the next 6 years. The analysis is based on the assumption that smart contracts in the Ethereum ecosystem will have a market share of 60%.
By Leonardo Perez
