On May 3, options contracts for Bitcoin and Ether worth a combined total of $2.4 billion are set to expire, potentially escalating market volatility.
Bitcoin options are derivatives that let investors bet on Bitcoin’s price fluctuations without holding the actual cryptocurrency.
These contracts are available in two forms: call and put options.
Call options grant the right to buy Bitcoin at a predetermined price before a specific date, whereas put options provide the right to sell it at an agreed-upon price before the contract expires.
The put/call ratio is a common metric used by investors to gauge market mood.
A dominance of put purchases suggests bearish sentiment, whereas more call buys imply a bullish outlook.
A put-to-call ratio below 0.7 signals bullish conditions, but a ratio above 1 indicates bearish sentiment.
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According to data from the Deribit exchange, 23,367 Bitcoin contracts valued at $1.39 billion will expire on May 3.
The put-to-call ratio for these Bitcoin options is currently 0.5, with a maximum pain point—a price level causing the most significant potential loss for the most holders—pegged at $61,000.
Additionally, 334,248 Ether contracts, representing a notional value of $1 billion, are due to expire shortly.
These contracts have a put-to-call ratio of 0.37 and a maximum pain point set at $3,000.
Historically, the expiration of such contracts leads to transient fluctuations in the cryptocurrency spot market.
In recent weeks, both Bitcoin and Ether have been under bearish pressure.
Bitcoin’s value recently dropped below $60,000, a nearly 20% decline in a week following its halving event, while Ether dipped below $2,900.
Typically, the market recovers from this expiry-induced volatility within a few days.
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