The cryptocurrency markets are preparing for significant volatility as a large number of Bitcoin and Ethereum options expire. Today, 69,000 Bitcoin options expired with a put/call ratio of 0.37, a maximum pain point of $66,000, and a total value of $4.7 billion. Additionally, 920,000 Ethereum options expired with a put/call ratio of 0.46, a maximum pain point of $3,300, and a total value of $3.5 billion. Despite some slight stagnation in the market this week, May has been one of the best-performing months in history, and the overall sentiment remains bullish.
Notably, there is a divergence between Bitcoin and Ethereum. According to data from Greeks.live, Bitcoin’s implied volatility (IV) has decreased, indicating a calmer market. In contrast, Ethereum’s IV remains high, suggesting ongoing interest and potential price swings. Taking advantage of this difference, it could be a favorable strategy to sell Ethereum and buy Bitcoin, especially considering the downward pressure on Ethereum’s IV.
Bitcoin continues to trade at high levels, just below its record highs. Deribit data reveals a put/call ratio of 0.61 for expired Bitcoin options, indicating more long contracts than short contracts. For Ethereum options, the put/call ratio is 0.46. The maximum pain point for Bitcoin is $66,000, while for Ethereum, it is $3,300. Currently, Bitcoin is trading at $68,171, and Ethereum is trading at $3,774, both above their respective pain points.
Open interest in Bitcoin options is currently high, with many long positions targeting strike prices of $70,000, $75,000, $80,000, and even $100,000. Some traders have placed long positions on Bitcoin with a target price of $100,000. The total notional value of all outstanding Bitcoin options contracts is $19 billion.
While the crypto market is experiencing a temporary pause in its bull run, there are concerns about macroeconomic factors that could hinder further gains. The two-year US Treasury yield is approaching 5%, which may entice macro traders to move their investments out of stocks, cryptocurrencies, and other riskier assets. This potential shift could impact the prices of Bitcoin and Ethereum.
Additionally, economic indicators are influencing the market. The Personal Consumption Expenditures (PCE) Price Index is projected to have risen by 2.7% annually in April, with a 0.3% increase expected month-over-month. A higher-than-expected core PCE figure could weaken the case for interest-rate cuts, leading to higher bond yields. Currently, Fed funds futures indicate investors expecting only 35 basis points of rate cuts this year.
In conclusion, the crypto market is bracing for volatility as Bitcoin and Ethereum options expire. The divergence between the two cryptocurrencies, along with economic factors, could impact their prices in the coming days.
