Some degree of normalcy had begun to return to the crypto market after last week's series of bank runs.
However, there are a couple of new developments, and the stock market may be in for some particularly wild swings in the coming week.
As option contracts linked to trillions of dollars worth of securities expired on Friday 17 March, removing a cushion that some claim has prevented the S&P 500 index from breaking out of a constrained trading range. U.S. stocks may experience further erratic swings in the coming days.
According to data from Goldman Sachs Group GS, +0.93%, $2.8 trillion worth of options contracts were scheduled to expire on Friday during the "quadruple witching" event.
The phenomenon known as "quadruple witching" occurs when equities futures and options contracts linked to specific companies and indexes, as well as exchange-traded funds, all expire on the same day.
The phenomenon known as "quadruple witching" occurs when equities futures and options contracts linked to specific companies and indexes, as well as exchange-traded funds, all expire on the same day. Some option contracts have morning and afternoon expiration dates. This normally occurs four times a year or once every three months.
Days like these are occasionally accompanied by market volatility as traders rush to reduce their losses or execute "in the money" contracts to realize their gains.
More than 40% of the average daily trading activity in futures linked to the S&P 500 is made up of Zero Days to Expiration (0DTE) Options.
It is believed that trade in 0DTEs earlier this week kept the S&P 500 from dropping below the 3,800 mark as markets shook following the shutdown of three U.S. banks last week.
Between March 9 and 15, crude oil prices also dropped 10%, hitting their lowest point in over a year. This decline was attributed to worries that a banking sector confidence crisis could trigger a recession and lower oil consumption.
As many already know, several stock options over the years, have shown a strong correlation to Bitcoin and Ether. Some of them include the Standard and Poor's Index (S&P 500) and the NASDAQ 100 (NDX).
While this stock options expiry event has certain advantages, such as increasing liquidity, these advantages might not be sufficient to calm investors who are still trying to recover from the failure of three US banks last week, as well as the series of remarks from Federal Reserve Chair Jerome Powell.
However, Bitcoin has done very well for itself, gaining as much as 26.5% ever since March 10 when the Department of Financial Protection and Innovation shut down the Silicon Valley Bank (SVB).
Many variables, including the $25 billion in funding by the Federal Reserve and the United States Treasury on March 12, which decreased banks' systemic risks, may be responsible for Bitcoin's impressive price recovery from the $19,600 zone this week.
Over the coming week, some turbulence in the crypto market is expected as the prices of Bitcoin and several altcoins swing wildly in either direction.
At the same time…
As of March 18, there is $1.2 billion in open interest. This figure is expected to be less, because it appears that the bears have focused their bets on Bitcoin selling below $23,500.
The 1.07 call-to-put ratio, as seen above, reflects the difference in open interest between the $640 million in put options and the $590 million in call options on Bitcoin.
Judging by the impressive recovery of Bitcoin's price this week on 13 March, the anticipated outcome is probably significantly lower. In all, this means that the bulls are likely to be the ones making the most profit at the end of it all.
As far as rough estimates go, traders who place call (buy) options appear more likely to come out on top in both bullish trades and bearish-neutral ones.
From now, Bitcoin bears must drive the price below $24,000 in order to reduce the effect of bulls.
According to data from CoinMarketCap, Bitcoin appears to be doing exceptionally well from a daily and weekly perspective. This doesn't look too good for the bears.
As illustrated above, Bitcoin has moved up by 6.73% over the last 24 hours, and by a whopping 31.37% over the last seven days.
One of the strongest signs of bullish momentum is the fact that Bitcoin has been trading over the $25,000 mark for more than two days now. As it climbs higher, the cryptocurrency continues to show signs of a strong upward trend.
After establishing a firm support level of around $23,964, the cryptocurrency's increasing momentum has propelled BTC past the $25,310 mark. If buyers are able to keep this price level above $25,310, then the way will stay open for more positive action.
The flagship cryptocurrency is trading at $26,168 at the time of writing, and appears more likely by the minute, to be on its way to the $30,000 mark before the end of next week.
To achieve this, however, the cryptocurrency must close with a daily candle above the $25,310 mark.
The daily RSI is not yet oversold and sits around the 70 mark. This adds to the possibility of further price movement to $30,000 as expected.
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.