Key Insights
- Bitcoin’s price held its ground after Friday’s options expiry event and the weekend.
- The put/call ratio for Bitcoin was 0.56, indicating a bullish market view.
- The maximum pain price for $BTC was $26,500, and prices remained above this level after the options expired.
- There are fewer contracts outstanding after the options expiry event. This means that volatility in the crypto market may decline in the next few days.
- Bitcoin’s price is bullish overall but needs to close above $32,000 to continue its rally.
Bitcoin has been the flagship of cryptocurrencies, making it a household name. Due to its unique technology, BTC conquered the world in no time. As the leading cryptocurrency, the uncertain fluctuation of Bitcoin’s price always impacts the market capitalization of other cryptocurrencies. Currently, Bitcoin is struggling below the $26,500 level.
Bitcoin’s price action went through some very interesting changes over the last 24 hours, just as the expiry of billions of dollars in quarterly open interest was set to happen sometime around 8:00 am UTC on Friday, last week.
This open interest expiry had a total notional value of $7 billion (4.86 billion on BTC, and 2.3 billion on Ethereum), and was expected to outperform the previous quarter’s value by about $300 million.
According to data from TradingView, Bitcoin hit local highs above $31,000 just as the clock ticked, before returning lower.
And as it turned out, BTC was able to hold its ground.
BTC’s price performance improved despite the second-largest options expiry event in its history, with experts eager to see how it affected markets.
What Was The Deal With The Bitcoin Options?
This options expiry event was a big deal for BTC and the entire crypto market.
The put/call ratio, which measures market sentiment, was 0.56 for Bitcoin and 0.57 for Ethereum.
In general, a put/call ratio between 0.5 and 0.7 indicates a bullish market view, suggesting favourable sentiment among traders.
Furthermore, the maximum pain price, or the strike price that would result in the greatest financial losses for option holders at expiration, was $26,500 for BTC and around $1,700 for Ethereum.
The expiry of these options, according to experts, would result in higher activity and volatility in the entire crypto market.
If Bitcoin remained over $30,000 by the time these options expired, investors would have been forced to buy BTC on spot and futures markets.
And, as it turns out, BTC did.
At the time of writing, Bitcoin is sitting above the $30,000 mark with a spot price of $31,170.
This indicates one of the first real signs that Bitcoin may very well begin to rally upward from here.
What Next For Bitcoin (And The Entire Market)?
Around 150,000 BTC options contracts worth approximately $4.5 billion and 1.2 million ether contracts worth approximately $2.3 billion expired on Deribit, the world’s top crypto options exchange (managing over 85% of worldwide crypto options activity), at 08:00 UTC on Friday.
The options expiry was critical because market makers in BTC options were “long gamma” and could have added to spot price fluctuations with their hedging activity.
BTC, on the other hand, appears steady, with a weak 24-hour/7-day price movement, and a relatively firm footing over $30,000.
The price of BTC options for June was expected to reach $26,500. This is the price at which option buyers would lose the most money.
Some people believe that options sellers, who are usually large traders, try to push the price to this level before the options expire. This would allow them to inflict maximum losses on option buyers and therefore make the most money.
In the bull market of late 2020 and early 2021, BTC consistently gravitated toward the max pain point before options expired. However, after the expiration that happened on Friday, the price of Bitcoin has remained steady.
Now that the June options have expired, the price of BTC is no longer being influenced by the max pain point. If other factors remain unchanged, bitcoin is now poised to continue upward, past $30,000.
Volatility May Decline In The Next Few Days
All may now be well over the horizon, after all. According to a tweet from blockchain and web3 reporter, Colin Wu, everything with ups must also have downs.
In the tweet, Wu mentioned (in short) that while the quarterly expiry in crypto markets has been completed, volatility may be on its way to declining over the next few days.
In layman’s terms, Wu’s tweet says that in the lead-up to the expiry, there is often a lot of trading activity as traders try to close out their positions or exercise their options. This can lead to volatility in the market (explaining Bitcoin’s impressive performance).
After the expiry, there is usually a release of positions, which means that there are fewer contracts outstanding.
Because of this, volatility in the crypto market may very well decline soon.
According to a pinned tweet from Greeks.live, the volatility index (Dvol) has now fallen to 43%, which is just 3% away from its all-time low.
This means that the market is now less volatile. It also means that all major maturities of the volatility index have fallen sharply since today, and this downward trend is likely to continue as the weekend approaches.
Bitcoin Price Performance
Despite the wind and rain, Bitcoin is still pretty bullish through the year.
The flagship cryptocurrency has successfully cleared several major resistances, from $19,650 to $24,750 to $30,000 as illustrated below.
It is clear that Bitcoin’s last hurdle is the $32,000 resistance.
On the daily chart, the Relative Strength Index (RSI) is now hovering around 64, indicating that Bitcoin is close to overbought territory.
Bitcoin has to close above the $32,000 zone with a clear daily candle, and then initiate a price bounce to the next price resistance around $34,000 – $35,000.
If Bitcoin’s bulls are unable to initiate this bounce, the cryptocurrency is bound to sink straight down to its 50-day moving average around $24,700.
Overall,
Bullish price target = $35,000
Bearish price target = $24,700
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.
