Crypto Options Expiry of $2.5 Billion Looms, Traders Brace for Volatility

Crypto markets are set to experience significant volatility as over $2.5 billion worth of Bitcoin (BTC) and Ethereum (ETH) options are set to expire. This event is closely watched by traders because it has the potential to influence short-term market trends due to the volume of contracts expiring and their notional value. Analyzing the put-to-call ratios and maximum pain points can provide insights into traders’ expectations and possible market directions.

The notional value of today’s expiring BTC options is $2.23 billion, with 27,657 contracts set to expire. The put-to-call ratio for these options is 0.86, indicating a higher prevalence of call options over put options. The maximum pain point for these expiring options is $81,000, which is the price at which the greatest number of contracts will expire worthless, causing the most financial losses for holders.

In addition to Bitcoin, 183,468 Ethereum contracts are set to expire today. These options have a notional value of $283.6 million and a put-to-call ratio of 0.92. The maximum pain point for Ethereum options is $1,700. The current market prices for Bitcoin and Ethereum are below their respective maximum pain points, with BTC trading at $80,622 and ETH at $1,543.

Analysts note a shift in crypto options, with short-term dips still bringing put demand. The call premium is further out of the curve and fades, suggesting that traders might be bracing for extended weakness in the crypto market. A fading call premium, where the implied volatility (IV) of calls drops relative to puts, indicates that traders are less optimistic about price increases in the near to medium term. This pattern reflects heightened concerns about downside risks in the crypto options market.

Global economic uncertainty, including the US-China tariff war, has dampened risk appetite. Crypto’s inherent volatility could also be fueling this cautious outlook. Sentiment has been more panicky this week, with frequent switching of tariff policies making the market extremely risk-averse. This suggests a need for hedging strategies, such as buying puts or diversifying into stablecoins. Cryptocurrencies are currently suffering from a lack of new incoming money, a lack of new narratives, and a more subdued investor sentiment. In this market of bulls to bears, the probability of a black swan event will be significantly higher, and buying some deep vanilla puts would be a good choice.