Crypto market prepares for $7B bitcoin and ether options expiries, expecting heightened volatility.
Bitcoin and ether traders are bracing themselves for a significant expiration of options contracts worth a staggering $7 billion. This event is anticipated to heighten volatility in the crypto market, especially after bitcoin’s recent period of hovering above $30,000, a level it has struggled to surpass over the past year.
Scheduled for Friday, the upcoming expiration encompasses 158,774 bitcoin contracts valued at $4.8 billion and 1.23 million ether options worth $2.3 billion on the Panama-based Deribit exchange, solidifying its dominance in over 85% of global trading for these instruments. These options, classified as financial derivatives, confer the right, but not the obligation, for buyers to engage in the purchase or sale of an underlying asset at a predetermined price within a specified timeframe.
Although substantial expirations are common for June, this particular event is garnering attention due to the recent surge in bitcoin’s price and the notable activity surrounding the $30,000 mark. Luuk Strijers, the chief commercial officer at Deribit, highlights that in June 2022, only around 90,000 bitcoin contracts expired on their platform.
Market Makers’ Impact on Crypto Volatility: Exciting Expiries and Price Pressures
Strijers highlights the significant effect of the upcoming expiries, describing it as an exciting event with potential pressure in both directions. When market makers buy to offset their short positions, it can speed up bitcoin’s rise, but if they sell during a potential decline, it can intensify the downward movement. Market makers, who are influential investors in the crypto industry, play a vital role in ensuring liquidity on exchanges.
Deribit identifies the maximum pain price, the level causing the most losses for the largest number of option holders at expiration, as $26,000 for bitcoin and $1,700 for ether. Strijers explains that many traders perceive this “max pain level” as a magnet holding the market at a lower level. However, with the expiration approaching, the removal of this magnet could potentially push the market upward.
Bitcoin reached its highest level in a year last week, surpassing $31,013, following news of BlackRock, the world’s largest asset manager, filing an application for a spot bitcoin exchange-traded fund (ETF). At present, bitcoin is trading at $30,591, while ether, the second-largest cryptocurrency by market value, stands at $1,856.