The crypto market is gearing up for a big event this week as millions of dollars worth of Bitcoin and Ethereum options expire on August 25, 2023.
Options are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price and time.
According to Greeks.live, a platform that provides data and analysis on cryptocurrency options, there are 72,000 Bitcoin options and 536,000 Ethereum options expiring this week, with a combined face value of $2.8 billion.
The platform also offers some key metrics to gauge market sentiment and expectations before expiry. One of these metrics is the put-call ratio, which measures the ratio of put options (bearish forecasts) to call options (bullish forecasts). A low put-call rate indicates that more investors are investing more in the price increase than a downturn, while a high put-call rate indicates the opposite.
As of this writing, the put-call rate for Bitcoin options is 0.55 and for Ethereum options is 0.39. This indicates that the market is more bullish than bearish for both cryptocurrencies.
Another metric is the maximum loss point, which is the price level that will cause the most loss to option holders at expiration. The maximum loss point is calculated by adding the eigenvalues of all options in profit (options with a positive return) and finding the price that minimizes this value.
The maximum loss point for Bitcoin options was $28,000, while for Ethereum options it was $1,800. This means that if Bitcoin and Ethereum prices settle to these levels at expiry, most option holders will either make losses or make minimal profits.
However, Greeks.live also said that he predicts that Bitcoin and Ethereum are likely to move away from their maximum loss points and recover after option expirations.
Analysts also noted that the $26,000 level has become a strong support level for BTC.
*Not investment advice.
