- BTC and ETH options expirations may cause volatility.
- Short-term options lag behind actual volatility movements.
As a seasoned crypto investor who has weathered numerous market fluctuations and expiration cycles, I find myself cautiously optimistic about the upcoming BTC and ETH options expirations. While these events have historically caused volatility, the current situation seems somewhat unique.
In partnership with Block Scholes, Bybit – the world’s second-largest cryptocurrency exchange by trading volume – has released its Crypto Derivatives Analytics Report. This report suggests that despite significant options expirations on December 27, 2024, the market is experiencing relatively low volatility. Contrary to the upward trend in Bitcoin‘s (BTC) and Ethereum‘s (ETH) volatility, short-term options have demonstrated minimal response to these price fluctuations, indicating that options may not be accurately reflecting the spot market movements.
Approximately $525 million worth of Bitcoin (BTC) and Ethereum (ETH) options contracts are due to expire within the next week, making December a potentially massive options expiration month. However, anticipation for market volatility remains subdued. The analysis reveals intriguing inversions in Ethereum’s structure, but this pattern is not mirrored by Bitcoin. It’s worth noting that financing rates sometimes dip into the negative as the spot price decreases, suggesting a shift in market dynamics.
Market Expectations and Volatility Shifts
Although both Bitcoin (BTC) and Ethereum (ETH) have shown increased volatility recently, this hasn’t been mirrored in their short-term options. The structure of BTC’s volatility is less responsive to fluctuations in spot prices compared to ETH, where short-term options are more reactive to such price changes. Over the last fortnight, the Bitcoin (BTC) spot price has varied between $92K and $106K, while the Ethereum (ETH) spot price has moved from $3.3K to $4K, but these short-term options haven’t followed suit with these market shifts.
The rates at which perpetual contracts receive funding follow the fluctuations in spot prices, shifting from a neutral state to a negative one. As for options, ETH’s short-term options tend to be highly volatile compared to longer-term ones, while the focus on long-term volatility is more on Bitcoin.
Towards the end of this year, around $360 million in Bitcoin option contracts (both call and put) will expire. This could potentially increase market volatility, impacting the direction and speed at which Bitcoin’s price might rise or drop.
At present, calls are dominating open interest, but a higher volume of put trades is occurring. This suggests that market players are preparing for possible price increases in both Bitcoin (BTC) and Ethereum (ETH), as their options markets show distinct trends as we approach the year’s end.
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2024-12-28 00:27