CoinNews reports:
With $5.2 billion worth of Bitcoin and Ethereum options expiring this week, the cryptocurrency market may be preparing for greater volatility.
Considering the price performance over the past two days, the top two cryptocurrencies by market capitalization seem to be heating up in terms of expected volatility. Bitcoin, in particular, dropped from a high of $69,000 on Monday to $66,848, a decrease of over 3.5%. Ethereum, on the other hand, fell 4.4% from $2,752 to $2,631 at the time of writing.
Will Bitcoin hit its maximum pain point?
It is worth noting that these contracts are set to expire at 8:00 UTC on Friday. Data from Skew shows that $4.2 billion is about to expire in Bitcoin options contracts. The maximum pain point for these contracts is $64,000. In this context, the maximum pain level is the price at which options traders would suffer the greatest loss.
According to popular belief, market makers typically push the price towards the maximum pain point to reduce traders’ profits. As a result, volatility increases in the market leading up to the options expiration date.
Meanwhile, the put-to-call ratio remains at 0.62, indicating a slight bullish sentiment among options traders. Considering Bitcoin’s recent break above $69,000, the market sentiment is expected to be bullish.
It is worth noting that the expiring options worth $4.2 billion in Bitcoin account for 16.26% of the trading contracts. Surprisingly, 83.74% of the options trades expiring on Friday are heavily dependent on Bitcoin’s price movement, further increasing the expected volatility.
Ethereum nearing maximum pain point
With approximately $1 billion worth of Ethereum options contracts expiring on Friday, the king of altcoins is just 1% away from its maximum pain point. At the time of writing, Ethereum’s trading price is $2,631, while the maximum pain point is $2,600.
It is worth noting that the open interest rate for Ethereum put options is 0.95, indicating a bearish outlook among traders. The open interest for put options is almost on par with call options, with 194,050 and 205,155 contracts respectively.
Furthermore, the dominant bearish sentiment surrounding Ethereum’s price reflects its underperformance compared to other high-quality assets. As a background, Ethereum is the worst-performing cryptocurrency among the top five by market capitalization, having only grown by 2.07% in the past 30 days.
Earlier, Matt Hougan, Chief Investment Officer at Bitwise, noted that Ethereum is the best contrarian bet of the year. He stated that the bearish sentiment surrounding the asset is the reason for its poor price performance. However, he predicts a rebound for Ethereum by 2025.
