In the previous 24 hours, BTC, ETH, including the rest of the market have collapsed. The two major cryptocurrencies have lost 7.6 and 8 percent of their value in the last day, respectively. Can we link to the 3.8 billion dollars in recently expired options contracts (at today’s prices)?
The answer, according to experts, is yes and no
BTC and ETH options are offshore contracts that give traders the right, but not the responsibility, to acquire the assets at a particular price in the future. When the options contracts are set to expire, the volatility of the market may increase. This is owing to the fact that future crypto purchases will either be held or sold by would-be traders.
On the 28th of May, the last Friday in the month, a wave of expired options send the market tumbling.
Today, Bitcoin and Ethereum options worth 83,700 Bitcoins (about 2.6 billion dollars approx.) and 685,000 Ether (approx. 1.2 billion dollars) expired. This is a new high for Ethereum in terms of the number of options contracts that will expire in a single day. Furthermore, the two assets are falling in value, meaning that traders are opting to dump them.
“I believe it’s plausible [it’s causing volatility] because it’s the biggest ever options expiration for ETH,” The CEO of CryptoQuant, Ki-Young Ju, said. He went on to explain that he is sure this was proof that the bear market is upon us, citing the fact that Ethereum supply has been rapidly rising across all exchanges, signaling that the traders and investors are preparing for a dump.
The market, on the other hand, was already experiencing difficulties
Last Tuesday, BTC plummeted below $30,000 since January. For the first time also, Ethereum went less than $2,000 level in value. The drop has a number of causes, one of which is China: This week, China’s central bank issued a warning to five top leading banks of the country, including Alipay, to refrain from conducting crypto-related activities.
This is only the recent in a long line of government initiatives aimed at the bitcoin industry. Before this, the Chinese government has imposed a ban on BTC mining, causing the currency’s price to plummet, as well as reiterating the 2017 prohibition from the central bank on financial and payment institutions engaging in cryptocurrency transactions.
Other experts believe this is exacerbating today’s price drop. According to an NFT Analyst, Alexandre Lores, at Quantum Economics, the market’s troubles are “more likely an issue of pressure from sell-offs.”