After bitcoin hovered above $30,000 for a week, volatility in cryptocurrencies is likely to surge on Friday due to a big number of options expiring for bitcoin and ether. For the past calendar year, the cryptocurrency’s value has been below that threshold.
The Deribit exchange in Panama, which handles more than 85% of the world’s trading in these instruments, will see the expiration of 158,774 bitcoin contracts worth $4.8 billion in June, Q2, and H1 and 1.23 million ether options worth $2.3 billion. Options are a type of financial derivative in which the buyer acquires the right but not the obligation to purchase or sell an underlying asset at a predetermined price and within a certain time frame.
Experts have different opinions on Bitcoin price fluctuations
According to Luuk Strijers, Deribit’s chief commercial officer, despite significant expirations being normal in June, the forthcoming expiry is gaining attention due to the recent bitcoin rise and substantial activity around the $30,000 price. Only roughly 90,000 bitcoin contracts at Deribit were set to expire in June 2022.
Strijers predicts, “It’s going to be quite exciting because there will be some pressure in either direction.” If bitcoin rises, it may be accelerated by market makers’ purchasing to balance their short positions; if bitcoin falls, as is possible of course, it will fall more quickly due to market makers’ selling. For cryptocurrency exchanges, liquidity is provided by “market makers,” who are major investors.
According to Deribit, $26,000 is the maximum pain price for the coin, or the price at which the greatest number of option holders would incur losses after expiration. The current price of ether is $1,700. To keep the market from rising too high, people are drawn to this maximum pain level. With the removal of the magnet this coming Friday, the market may rise, as explained by Strijers.
Last week, the original cryptocurrency surpassed $31,013 for the first time in a year after the largest asset manager in the world, BlackRockBLK +0.4%, applied for a spot bitcoin exchange-traded fund. As of 3:00 PM on a Friday in New York, its price had reached $30,591. Ether, the second most valuable cryptocurrency, is currently selling for $1,856.
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