Over $10 Billion in Crypto Options Expiring Today: What It Means for Bitcoin and Ethereum
2025-01-31
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The crypto market will witness $10.31 billion in Bitcoin and Ethereum options contracts expire today. This massive expiration could impact short-term price action, especially as both assets have recently declined.
With Bitcoin options valued at $8.36 billion and Ethereum at $1.94 billion, traders are bracing for potential volatility.
High-Stakes Crypto Options Expirations: What Traders Should Watch Today
Today’s expiring options mark a significant increase from last week, as it expires at the end of the month. According to Deribit data, Bitcoin options expiration involves 80,179 contracts, compared to 30,645 contracts last week. Similarly, Ethereum’s expiring options total 603,426 contracts, up from 173,830 contracts the previous week.
These expiring Bitcoin options have a maximum pain price of $98,000 and a put-to-call ratio 0.68. This indicates a generally bullish sentiment despite the asset’s recent pullback. In comparison, their Ethereum counterparts have a maximum pain price of $3,300 and a put-to-call ratio of 0.43, reflecting a similar market outlook.
Put-to-call ratios below 1 for Bitcoin and Ethereum suggest optimism in the market, with more traders betting on price increases. Nevertheless, analysts call for caution due to the tendency of options expiration to cause market volatility.
“This could bring significant market volatility as traders reposition ahead of expiry, expect sharp price movements and potential liquidations,” Crypto Dad, a popular user on X, warned.
The warning comes as options expirations often cause short-term price fluctuations, creating market uncertainty. Meanwhile, BeInCrypto data shows Bitcoin’s trading value has dropped by 0.64% to $104,299. On the other hand, Ethereum’s price is up by a modest 1.04%, now trading at $3,226.
Implications of Options Expiry on BTC and ETH
With their current prices, Bitcoin stands well above its maximum pain level of $98,000, while Ethereum is below the strike price of $3,300. The maximum pain point or strike price is a crucial metric that guides market behavior. It represents the price level at which most options expire worthless.
Based on the Max Pain theory, BTC and ETH prices will likely approach their respective strike prices, hence expected volatility. Here, the largest number of options (both calls and puts) would expire worthless as these options contracts near expiration.
Option buyers who lose the entire value of their options would feel the “pain.” On the other hand, option sellers would benefit as the contracts expire out-of-the-money, and they keep the credit received from selling the options.
This happens because the maximum pain theory operates on the assumption that option writers are typically large institutions or professional traders, otherwise termed smart money. Therefore, they have the resources and market influence to drive the stock’s closing price toward the maximum pain point on expiration day.
“Traders often monitor this level as it can influence price movements as expiration approaches,” one analyst on X wrote.
Based on this assumption, these market makers will hedge their positions to maintain a delta-neutral portfolio. As their positions near expiration, they offset their short option positions by selling or buying the contract, influencing the price toward the maximum pain point.
Of note, however, is that markets usually stabilize soon after as traders adapt to the new price environment. With today’s high-volume expiration, traders and investors can expect a similar outcome, potentially influencing crypto market trends into the weekend.