This is the biggest pain point for Bitcoin and Ethereum in the current cycle


Share:
  • $1.3 billion of Bitcoin options are set to expire on October 28 with most holders finding the paper they were written on worthless.
  • Ethereum options worth $1.1 billion are also set to expire, two days after the altcoin ushered in a new price rally. 
  • Ethereum’s historical volatility has hit a monthly high of 57.35% in light of the massive breakout in the altcoin.

According to data from crypto options and futures exchange Deribit, on October 28, a larger-than-average $2.4 billion worth of Bitcoin and Ethereum options are set to expire. Over the past week, Ethereum price witnessed a massive recovery, and Bitcoin price climbed above the $20,000 level. 

Many option traders are likely to have been caught out by the bullish pivot, with data from options exchanges revealing a higher ratio of traders purchased bearish put contracts, betting on BTC and ETH price going down, than bet it would rise. The majority of losers will see their put options expire worthless, whilst those who bought bullish call options are set to celebrate. 

Also read: Bitcoin price: BTC approaches key level at $20,750, analyst predicts decline in the asset

Large volume of Bitcoin and Ethereum options expire on October 28

Data from Deribit, a crypto options exchange reveals a particularly large volume of Bitcoin and Ethereum options are set to be cashed in – or not, today.. $1.3 billion worth of Bitcoin options and $1.1 billion in Ethereum options reach their expiration date on October 28, 2022. The total Bitcoin option market cap at any given time rarely rises above $10 billion so that puts this mega-expiry into perspective. Indeed, it was only back in June 2020 that the record for a Bitcoin options expiry stood at $1 billion. 

Today options expiry is also significant due to the volatility in Bitcoin and Ethereum prices in the week leading up to the expiration date. 

Open interest by strike price on Deribit

Open interest by strike price on Deribit

Bitcoin and Ethereum maximum pain point

The past week saw Bitcoin price breaking past the $20,000 barrier and Ethereum yielding 17.5% gains for holders. Indeed, with its rapid price movements, Ethereum’s historical volatility has hit 57.35%, a monthly high. 

This is great news for those who bought BTC and ETH call options but not so great for those who bought put options. The Put/Call Ratio for the day for BTC stands at 0.85 for October 28 and shows the majority were buyers of puts and thus are likely to be feeling the pain as their contracts expire worthless. For Ethereum the Put/Call ratio stands at a lower 0.68 suggesting even more traders betted wrongly that the market would fall and will be drinking their cups of woe.

Colin Wu, a Chinese journalist has evaluated the data from Deribit’s charts on Bitcoin and Ethereum options and identified the $1,400 level as Ethereum’s biggest pain point, meaning if ETH remains above that level it will cause the greatest pain for bearish put holders. For Bitcoin the biggest pain point is the $19,500 level. 

The Put/Call ratio is considered an indicator of trader sentiment and a value greater than 0.7 which signal traders are buying more puts than calls, is usually interpreted as bearish. Therefore, at 0.85 and 0.68 trader sentiment for Bitcoin and Ethereum actually remains overall bearish. 

However the indicator can also be used in a contrarian fashion with volatile changes higher or lower signaling reversals on the horizon. It is in this way that it might have signaled the recent swing higher in price for the two cryptos. Further declines are unlikely but they might eventually give another contrarian bullish signal too.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

Binance suspends USD transfers, CZ says the issue is being resolved

Binance suspends USD transfers, CZ says the issue is being resolved

Binance, the world’s largest exchange by trade volume, has announced that USD bank transfers will be temporarily suspended. Only a small portion of the exchange’s users will be impacted by the interruption of the service. 

More Binance Coin News

Shiba Inu bulls watch for reaction in SHIB price as total value locked in ShibaSwap doubles

Shiba Inu bulls watch for reaction in SHIB price as total value locked in ShibaSwap doubles

Shiba Inu ecosystem witnessed a slew of positive developments with the launch of layer-2 scaling solution Shibarium’s beta, rising total value locked in ShibaSwap and skyrocketing SHIB burn rate. 

More Shiba Inu News

Will Bitcoin price test $20,000 again?

Will Bitcoin price test $20,000 again?

Bitcoin price shows clear signs of distribution occurring on the four-hour chart, which indicates the possibility of a trend reversal. Moreover, BTC has been consolidating for more than two weeks with no direction in sight, making it a perfect place to form a local top.

More Bitcoin News

Ethereum Classic inching towards greatness?

Ethereum Classic inching towards greatness?

Ethereum Cassic price is consolidating before what appears to be the next move up. Risk management should be considered moving forward, as the ETC price will likely witness an influx of volatility.

More Ethereum Classic News

Bitcoin: Nonfarm Payrolls on the radar after Powell’s speech propels BTC higher

Bitcoin: Nonfarm Payrolls on the radar after Powell’s speech propels BTC higher

Bitcoin (BTC) price is at an inflection point as it continues to rally amid multiple sell signals on lower time frames. The Nonfarm Payrolls (NFP) report, including the unemployment rate and average hourly earnings, is set to be announced on February 3 at 1330 GMT.

Read full analysis

BTC

ETH

XRP