Over $11 billion worth of Bitcoin and Ethereum options will expire on Deribit on Friday. Both cryptocurrencies are trading well above their “maximum pain points.” One observer says the market is unlikely to see major volatility before expiration.
Giant options for two cryptocurrencies are expiring!
Bitcoin is holding above $40,000 with hours remaining until the last three-month option expiration of 2023. So, it remains well supported. At 11 a.m. ET on Friday, $7.7 billion worth of options on Bitcoin (BTC) and $3.5 billion worth of options on Ethereum (ETH) will expire on crypto exchange Deribit. Luuk Strijers, chief commercial officer of the exchange, makes the following statement:
The total amount of over $11 billion marks Deribit’s largest ever expiration transaction. Almost $5 billion of this will be converted into cash, the largest amount ever. It will also potentially result in above-average hedging and trading activity.
All eyes will be on ETFs after maturity!
cryptokoin.comAs you follow from , Bitcoin price increased by 60% this quarter. Additionally, Ethereum price saw a 43% increase. This increase in cryptocurrency prices has caused investors to seek to add upside risk through ‘call’ options. This explains the record open interest for in-the-money call options. According to Strijers, customers are switching their positions from December maturities to contracts expiring in January and subsequent months. Moreover, this process will probably continue until Friday’s three-month settlement. In this context, Strijers shares the following assessment:
Beyond hedging, we are also seeing clients move their positions into 2024 futures contracts. We also expect to see more as we get closer to expiration and beyond. After expiration, all eyes and trading activity will be focused on the upcoming ETF decision.
What will be the impact for cryptocurrencies?
It also shows Bitcoin’s maximum pain point (MPP), or the level at which option buyers stand to lose the most at expiration. The theory is that option sellers, often institutions with abundant capital supplies, try to push the spot price of the underlying asset towards this level to ensure that their counterparties, the buyers, suffer the most. In late 2020 and most of 2021, Bitcoin saw volatility towards its maximum pain point until expiration. However, after the settlement, the leading cryptocurrency continued its upward trend. Still, market analyst Chang expects prices to remain stable before expiration on Friday. He explains his views on this subject as follows:
BTC MPP at $33,000 and ETH MPP at $1,900 are far from current prices. MPP may provide highlights from time to time. But for now, we expect BTC and ETH to move very little into MPP. There is no need to worry too much about MPP right now. If such a thing were to happen, it would only be possible if a catastrophe occurred on Earth. I plan to keep a close eye on new options trading tapes after the major options expiration. I also think the market is heading towards the final spark. I expect the last real move to happen very soon.
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