An unusually large bitcoin and ether options expiration on Friday is likely to increase crypto volatility after bitcoin spent a week above $30,000. The cryptocurrency has spent the last 12 months below this mark.
A total of 158,774 bitcoin contracts from June, Q2 and H1 worth $4.8 billion and 1.23 million ether options worth $2.3 billion will expire on the exchange Deribit based in Panama, which hosts more than 85% of the world's trade in these instruments. Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at a certain price within a specified period of time.
Although large expiries are typical for June, the upcoming expiry is attracting attention due to bitcoin's recent rally and significant activity around the $30,000 price, according to Luuk Strijers, Chief Commercial Officer of Deribit. In June 2022, only about 90,000 bitcoin contracts expired at Deribit.
"It's going to be quite exciting because there will be some pressure in both directions," Strijers said. “If bitcoin goes up, it could go up faster because market makers will buy to offset their short positions, and if it goes down, which of course could happen, it will go down faster because they will sell.” Cryptocurrency market makers are large investors who provide liquidity to exchanges.
The maximum pain price — the price that would cause the most losses for the most options holders at expiration — for bitcoin is $26,000 according to Deribit. It amounts to $1,700 for ether. “People see this maximum pain level as a magnet to hold the market down. And if the magnet is removed, which will happen this Friday, it could drive the market higher,” says Strijers.
The original cryptocurrency hit its highest level in a year last week, surpassing $31,013, after BlackRockBLK, the world's largest asset manager, filed for an exchange-traded fund. cash in bitcoins. It is trading at $30,591 on Friday afternoon in New York.
Ether, the second largest cryptocurrency by market value, is trading at $1,856.
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