As Bitcoin approached the $26,000 mark with a 2.06% drop in the last 24 hours, investors focused on Bitcoin (BTC) and Ethereum (ETH) options that will expire this week.
According to Coindesk, at 08:00 UTC on Friday, a total of 1,217 million BTC and ETH option contracts worth $4.8 billion will expire on leading crypto options exchange Deribit.
Commenting on BTC and ETH option expiration, Deribit official Luuk Strijers said:
“Usually the most important period in terms of volume and value is the last quarters.
At this point, for example, a total of $5.2 billion of options expired last March and a total of $5.4 billion in June.
The current quarter remains consistent with previous quarters in 2023.
This September, the $3 billion BTC option and $1.8 billion ETH option will expire and the Max Pain Point level will be close to current price levels.”
What is “Maximum Pain Point”?
The “Maximum Pain Point”, which is the price level that will cause the most loss for option buyers and the most gain for option sellers, was recorded as $ 26,500 for BTC and $ 1,580 for ETH. These levels are close to the current levels of $26,056 and $1,567.
The “Maximum Pain Point” often acts as a magnet for the market price as option sellers try to push the price towards this point to minimize their payouts.
So, if the price is above the max pain point, max pain works as support, but if the price is below the max pain point, max pain can act as resistance. There is a high probability that the price will move towards this level as the options market approaches on the last Friday of each month.
Evaluating the impact of options expiration on the price, Blofin trader Griffin Ardern said that they do not expect high volatility in the market.
Addressing the gamma data at this point, Griffin Ardern stated that the options expiring on September 29 have a very significant positive gamma and said:
“The probability of price stability in BTC and ETH is very high. Options this week have a very significant positive gamma.
As the maturity date approaches, the gamma will gradually grow larger, thus creating a strong pull on the price.
“Friday's three-month consensus price is more likely to be near the top gamma exposure levels of $26,000-$27,000 for BTC and $1,500 or $1,650 for ETH.”
*This is not investment advice.