Bitcoin (BTC) and Ether (ETH) options contracts worth a combined $2.4 billion are scheduled to expire on May 3, which could result in increased market volatility.
A Bitcoin options contract is a financial agreement that allows investors to speculate on the price movements of Bitcoin without actually owning it.
There are two types of options: call options and put options. Call options give investors the right to buy a cryptocurrency at a specific price before a certain date, while put options allow investors to sell a cryptocurrency at a predetermined price before the expiration date.
The put/call ratio is often used by investors as a gauge of market sentiment. If more traders are buying put options than call options, it is seen as a bearish sign, whereas if more traders are buying call options than put options, it is considered bullish.
A put-to-call ratio below 0.7 is considered bullish, while a ratio above 1 is seen as a bearish indicator.
On May 3, a total of 23,367 Bitcoin contracts worth $1.39 billion are set to expire. Data from the Deribit exchange shows that the put-to-call ratio for Bitcoin options contracts currently stands at 0.5, with a maximum pain point of $61,000. The maximum pain point refers to the price at which the asset will cause the most financial losses to holders.
Similarly, a total of 334,248 Ether contracts with a notional value of $1 billion are also expected to expire on Friday. These expiring contracts have a put-to-call ratio of 0.37 and a maximum pain point of $3,000.
Historically, the expiration of options contracts has been followed by short-term price volatility in the cryptocurrency market. Bitcoin and Ether have recently faced bearish pressure, with Bitcoin dropping below $60,000 and Ether falling below $2,900. However, the market often rebounds from the volatility caused by options expiration within a few days.
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