$1.86 Billion in Crypto Options Expiry to Test Market Stability

As $1.86 billion in Bitcoin (BTC) and Ethereum (ETH) options approach expiration, the crypto markets are grappling with heightened volatility, spurred by lower-than-expected US Consumer Price Index (CPI) data.

With the markets reacting sharply to this economic indicator, traders are preparing for potential price swings as the deadline approaches.

What’s Next for Bitcoin and Ethereum Options Market Post-Expiry? Analysts Weigh In

According to Deribit, nearly $1.4 billion in Bitcoin options are set to expire, with a maximum pain point of $59,500. This batch of options includes 24,383 contracts, down from the previous week’s 31,615. The put-to-call ratio is 0.83, reflecting a slightly bearish market sentiment.

For Ethereum, $471.79 million in options are expiring, involving 183,821 contracts — a decrease from last week’s 206,626 contracts. The maximum pain point is $2,650, with a put-to-call ratio of 0.80, suggesting a cautious market outlook.

Read more: An Introduction to Crypto Options Trading

The “maximum pain point” in crypto options is crucial, representing the price level where option holders face the most significant financial discomfort. Additionally, the “put-to-call ratio” indicates a higher prevalence of purchase options (calls) over sales options (puts). Lower ratios indicate optimism and higher ones signal bearishness.

Analysts from Greeks.live have commented on the market conditions leading up to today’s expiration. They noted that the US July Consumer Price Index (CPI) data was slightly lower than anticipated, hitting a new low since March 2021. This outcome has led to speculation that the Federal Reserve might cut rates in September, with expectations centered around a 25-basis-point reduction.

They further noted that after the ETF was passed, Ethereum’s price showed weakness, leading to a decline with only a modest rebound. Short-term implied volatility (IV) also decreased, with a skew favoring put options.

“Such declines in implied volatility are relatively rare in the options market, and the predominantly institutional sellers were able to cover a lot of their profits in this round of declines to make up for the hedging losses from the huge volatility over the last month. Now that the term structure is back to a solid structure of far higher and near lower, the market will probably be deposited for a while now, and the profit-to-loss ratio for selling medium-duration options looks better now,” Greeks.live analysts suggested.

As of now, Bitcoin has dropped to $57,255, down from nearly $60,000 before the CPI data release. Similarly, Ethereum fell from $2,751 to $2,534. It is currently trading at $2,562.

Read more: 9 Best Crypto Options Trading Platforms

Historically, the expiration of options contracts often leads to sharp yet temporary price movements, causing the crypto market to experience uncertainty and volatility as traders prepare for these fluctuations. However, the market typically stabilizes shortly after these expirations.