Altcoins could surge as Bitcoin struggles to break free from range-bound movements, presenting new opportunities in the market. Contracts worth over $14 billion in Bitcoin options are scheduled to expire on Deribit. This expiry is the biggest event on the exchange, accounting for 44% of all open interest in Bitcoin options. At the same time, $3.84 billion worth of Ethereum (ETH) options will expire.
Options contracts allow traders to hedge against possible losses or speculate on the price of an asset. $4 billion worth of Bitcoin options might expire “in the money” (ITM) due to this Friday’s settlement, giving buyers profits. To control risk, traders may roll over or liquidate positions, but market instability is a real possibility. To prepare for new market dynamics in 2024, economists anticipate that open interest may move to the January 31 and March 28 expiries.
Market volatility surge
This expiry event’s unparalleled scope has increased market directional uncertainty. Deribit CEO Luuk Strijers has talked about the increased possibility of a “snowball effect” if the market keeps declining. Although there is more interest in optimistic wagers, as indicated by the put-call open interest ratio of 0.69, the price of Bitcoin, BTC$98 471, has dropped sharply. Notably, after the Federal Reserve’s hawkish position on interest rates, Bitcoin recently fell more than 13% after peaking at $108,268.
Hopes for a customary “Santa rally” have been dimmed by this. The biggest cryptocurrency is selling at about $93,940, down 2.2% over the last day, according to statistics. Metrics based on options show how hesitant the market is right now. Price turbulence is measured by the volatility of volatility (vol-of-vol), which is still high. For traders exposed to leveraged positions, this sensitivity may result in quick price changes and elevated volatility.
Ethereum Faces Pressure
Going into this expiration, Ethereum ETH$3 499 seems more vulnerable than Bitcoin. Block Scholes data indicates that implied volatility for ETH calls has decreased. This shows a decline in the demand for bullish wagers. ETH’s put-call skew, favouring options at 2.06%, further highlights a pessimistic view in contrast to Bitcoin’s neutral position. Notably, after breaking through a significant resistance level of $4,000, Ether’s value has dropped by 15%. The cryptocurrency trades at over $34,000, up 1.78% from the previous day.
Altcoin Rally Ahead
Meanwhile, some analysts predict that investment capital may shift from Bitcoin to altcoins if the leading cryptocurrency stays range-bound. Following this record expiry, altcoins could gain impetus, according to Singapore-based QCP Capital. “We may see alts begin to catch up once more as Bitcoin struggles below 100,000,” the business said.
Also Read: Altcoins Dominating South Korea Crypto Market in 24 Hours
In Summary
In conclusion, there will likely be much market volatility and uncertainty due to the impending expiration of important Bitcoin and Ethereum options contracts. With more than $14 billion worth of Bitcoin and $3.84 billion worth of Ethereum options about to expire, the magnitude of the event could cause a change in the dynamics of the market.
Altcoins may gain traction as a result of Ethereum’s susceptibility to pessimism and Bitcoin’s recent price decrease, especially if Bitcoin finds it difficult to hold onto its position. As we move into 2024, traders will have to deal with increased risk and volatility, and many will be intently monitoring any changes in open interest and market sentiment.
