Bitcoin volatility rising as $4.2 billion options set to expire Friday

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key takeaways

  • Bitcoin Volatility Highest Point Since July 2022
  • Liquidity is very thin which is increasing volatility and driving up prices
  • $4.2 billion in options expire Friday as bulls look to take profits after a recent rally to $28,000

yesterday, i wrote a Piece how are you seeing the relationship between Bitcoin And the stock market, in particular tech stocks, is back up. The correlation was weakened amid the banking turmoil in the financial markets due to the collapse of Silicon Valley Bank.

Along with rising correlations, the market is also swinging wildly – ​​volatility as high as it has been since July 2022, when Celsius evaporated into thin air and sent the market into mayhem.

Why is volatility rising?

The increase in volatility is not surprising in light of the current glut of liquidity in the markets. we have prepared Piece Earlier this week, assessing how 45% of stablecoins were flushed from exchanges in the last four months, the balance is now at its lowest point since October 2021.

This refers to the recent rise in bitcoin prices. With less liquidity in the markets, moves are naturally more violent, and bitcoin soared to $28,000, now up 68% this year.

While this thin liquidity has led to upward moves, the opposite is also true: When markets are too thin, downside risk is amplified.

This paints a picture of high risk for an asset that already oscillates wildly in the best of times.

derivatives add to volatility

Another factor? Derivatives open interest is on the rise, with the chart from CoinGlass below showing that options open interest is at its highest point since November 2021.

As I write this on March 31, a whopping $4.2 billion worth of bitcoin options are about to expire. The chart below also shows the strike prices of the options – with a Call/Put ratio of 2.09 and Bitcoin currently trading near $28,000, this will be a profitable day for many traders.

Digging into the numbers, 97,300 call options are expiring at a strike price of $28,000 or less, compared to 24,500 put options. The dollar split on the call side is over $2 billion.

Looking at the strike prices of the next level, it is almost all call options. There are 48,000 call options against 400 put options with $1.4 billion split in favor of calls between $28,000 and $32,000.

After a year of bear dominance, some bulls will finally be ready to turn a profit.

In fact, looking at bitcoin spot holdings, it is showing more positive news across the market. In December, most bitcoins were in the red when the market capitalization was compared to the price at which they last moved.

Today, however, 74% of the supply is in profit using the same metric.

With interest rate policy expectations softening, bitcoin has finally been allowed to run. However, with low liquidity and high volatility comes risk, although risk is hardly a foreign concept when it comes to bitcoin.

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