Final hours! Save up to 55% OFF InvestingProCLAIM SALE

Bitcoin's Quiet Options Expiry Shows It's Not the Only Game in Cryptotown

Published 05/01/2021, 04:37 AM
Updated 05/01/2021, 04:43 AM
© Reuters.
BTC/USD
-
ETH/USD
-
ETH/USD
-

By Yasin Ebrahim

Investing.com –Bitcoin racked up gains Friday, plotting course for another ride above $60,000, but unexpectedly calm expiry of $3.5 billion worth of BTC options suggests BTC is not the only game in town.

BTC/USD rose 7.7% to $56,962, though remains near its record high of $64,778.

In the run up toward the April 30 options expiry, investor attention was fixated on the option sellers.

The path toward victory for the sellers is to move the price of bitcoin to a level that results in the maximum pain, or biggest losses for option holders at expiration: the "maximum pain price."

The maximum pain point for option traders for the April 30 expiry was set a $54,000, but in the seven days leading up to the expiry, BTC jumped from $48,000 to over $54,000 to trade within the maximum pain point.

"The combined 54,000 call/put strikes represent an intrinsic value of only $49,000,000, meaning that the majority of long calls and puts for the April monthly contracts are expiring worthless," said Nate Cox, chief investment officer of Two Prime, a digital assets investment firm specialized in bitcoin and ethereum.

In recent history, as option expiration draws closer, wild swings in the price of bitcoin follow as the option sellers and buyers battle it out. But this time was different, both sides were muted.

"Bitcoin’s expiration at max pain point in April has many option traders scratching their heads. For the first time in months, long vol bets (upside calls) didn’t pay off as expected, and downside volatility remained muted," Cox said.

The lack of action shows that bitcoin is not the only game in the crypto town as its younger sibling Ethereum hogged the limelight.

"If you’re wondering where it went, look no further than bitcoin’s younger sibling Ethereum, where monthly returns soared nearly 40% and long volatility bets paid off exponentially. It’s not uncommon to see the two largest digital assets ‘take turns’ or experience rotation as traders and arbitrageurs try to anticipate divergence and capture alpha."

The fundamental data echo's this point as bitcoin’s dominance rate - the ratio of BTC market cap over total market cap – fell to vulnerable to a break below 50% for the first time since July 2018.

ETH/USD rose 1.34% to $2,763.93, and has racked up 17% of gains over the past seven days.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.