- BTC and ETH traded below their maximum pain points, indicating that traders could face serious losses
- Implied volatility fell, indicating a lack of positive expectations for the future
Bitcoin [BTC] and ether [ETH] options contracts worth approximately $2.3 billion expire on Friday, May 3. According to Deribit Exchange, Bitcoin options are valued at $1.35 billion. ETH contracts, on the other hand, are worth $990 million. The value of these contracts appears to be lower than the figure AMBCrypto reported last week – $9.3 billion.
The reject can be attributed to the price action of both cryptocurrencies. For most of the week, BTC and ETH recorded severe declines before the recent appreciation. As a result, traders have been cautious about opening more positions.
At the time of writing, Bitcoin’s put/call ratio (PCR) was 0.50. This ratio measures the overall mood of the market. A PCR higher than 1 indicates that traders are buying more puts than calls: a sign of bearish sentiment.
Source: Deribit
Anarchy looms as traders gear up for results
However, if the PCR is below 0.70, it implies more calls than puts, meaning broader sentiment is bullish. Simply put, the reading suggests that traders expect Bitcoin to end the week stronger than how it started.
For Bitcoin, the maximum pain point was $61,000 on the charts. This means that if Bitcoin falls to this price, most options traders will suffer large losses.
In the case of Ethereum, the PCR was 0.37, implying that there were more bullish bets than bearish bets. The maximum pain point for ETH was $3,000. As such, traders may have to hope that the altcoin trades above this level before the end of the day.
Source: Deribit
At the time of writing, both Bitcoin and Ethereum were valued at levels below the maximum pain point. If this remains the case by the time the contracts expire, the day could become a “red day” for many traders.
There are a few reasons why BTC and ETH could end the week bearish. Greeks.live, the remarkable options trading on explained,
“The Hong Kong ETF listing did not generate much volume, the US BTC ETF continued to outflow and market weakness led to a weakening of market confidence. The current point of continued sideways trading is unlikely; no upturn will undoubtedly be a downward relay, the giant whale about the lack of confidence in the market.
Volatility Declines: Will BTC and ETH Follow?
In addition, AMBCrypto looked at Bitcoin’s implied volatility (IV). The IV shows the confidence in the market and whether it would be a good idea to buy call/put options in the future.
As the IV rises, market participants are uncertain where prices might move next. However, if the benchmark falls, it means that traders are unwilling to pay an additional fee to secure their existing positions.
Source: TheBlock
Considering the price of Bitcoin and ETH, the IV turned downindicating that traders were not confident that their bullish bets would pay off.
Read Bitcoin’s [BTC] Price forecast 2023-2024
Should this sentiment materialize, ETH’s price could fall back below $2,900. For BTC, it could start trading at a value lower than $59,000 again.