Bitcoin Options Market Suggests Diminished Volatility: A Prelude to an Impending Turbulence?

The Bitcoin market is closely monitoring the outcomes of the Bitcoin options expiration scheduled for Friday. As of writing, Bitcoin has successfully maintained its position above $61,000, thanks to bullish efforts. Throughout the week, the battle between buyers and sellers has kept Bitcoin’s price seesawing between $59,000 and $61,000.

Today Sees the Expiration of 18,474 Bitcoin Options

18,474 Bitcoin options are poised to expire today, holding a notional value of $1.12 billion and featuring a put-call ratio of 0.83, as per information from Deribit’s data. This figure indicates a predominantly neutral sentiment, but the near 1:1 ratio suggests that put options are giving call options a significant challenge. This week also highlighted an uptick in block trading of BTC options, where investors have been offloading call options and snapping up puts. The most discomforting price point—at which the collective market stands to lose the most—is set at $60,000 for this Bitcoin options expiration, as depicted in the chart below.

Further analysis reveals a downtrend in weekly option positions, with implied volatility remaining quite neutral before today’s Jackson Hole symposium. The current state of the options market forecasts a tranquil period, marked by a consistent term structure and moderated expectations of future volatility swings.

Monotony Expected in Bitcoin Trading

The Bitcoin value has undergone restricted fluctuations within the $50,000-$70,000 range during the second quarter of 2024. Market analyst Will Woo predicts this uneventful trend in Bitcoin’s price movement is likely to persist until the market sheds excessive leverage.

He elaborated that the Bitcoin downturn in early August triggered widespread liquidation of leveraged holdings, effectively clearing the majority of open interest from the market. Woo recognized this as a necessary “healthy reset” that must occur before Bitcoin can resume its upward trajectory.

According to Woo, we must endure a dull phase in Bitcoin trading before witnessing substantial price gains. He estimates that the correction process is approximately two-thirds complete, with a significant proportion of speculation having departed. However, further absorption of Bitcoin into the spot market is required.

This mid-June assessment is still in play. BTC price action needs to get really boring. I feel like we are 66% the way there. Much of the speculation has left, we still need more of the spot BTC to be absorbed. https://t.co/Of24lomrUE

— Willy Woo (@woonomic) August 21, 2024

Woo also mentioned that the crypto market has now shifted from a bearish to a neutral position, and we are no longer in a bear market. Instead, we are in a phase of extended BTC consolidation, he suggested.

Ethereum Options Also Approaching Expiration

Not just Bitcoin, but also Ethereum (ETH) options are on the expiry schedule today, totaling 140,000 with a Put/Call Ratio of 0.93. Ether options feature a max pain point of $2,625 and a notional worth of $370 million. Presently, the Ethereum price enjoys a 1.4% upturn, trading at $2,672 with a $321 billion market capitalization, eyeing further momentum toward $3,000.

Bhushan Akolkar

Bhushan is a FinTech enthusiast with a keen grasp of financial markets and a passion for economics and finance, which piqued his interest in blockchain and cryptocurrencies. Continually learning, he shares his knowledge and enjoys exploring new culinary experiences in his spare time.

Disclaimer: The content above reflects the author’s personal opinion and should not be considered financial advice. Perform your due diligence and assume full responsibility for any loss incurred.