As the leading cryptocurrency Bitcoin [BTC] fails to reclaim the $11k threshold, more volatility is predicted within the upcoming few days, with options expirations leading to a possible price factor.
Earlier on Sunday, Bitcoin closed at around $10,922 USD, reversing almost adequate to what was gained the previous day when it reached over $11,076 USD. The decrease broke the upward trend experienced by the leading cryptocurrency within the past 7-days. It’s presently trading sideways at $10,977 USD.
The volatility is predicted to continue as 48% of Bitcoin options are near to expire on Friday. This is almost half of all the Bitcoin options. Though the whole value locked at the options is around $1.9 Bln, it’s rare to possess a high concentration on short-term options for soon. While there’s no level to be sustained in options, large open interest and liquidity would permit large players to be within the market and permit more complicated trading strategies, the report adds.
Options are financial derivative instruments that permit buyers to have the right not obligation to buy assets at a defined price at a set time within the mere future, for which they pay a premium to sellers. If on the required date, the worth of the contract is above the set price, the customers will receive profits once they execute the contract. If they refuse to purchase, they lose the premium they originally paid.
Volatility is another factor to work out whether Bitcoin is close to having an enormous move or not. It also affects what proportion premium is paid in options trades. High volatility simply means that the buyers will need to pay a higher premium. At the present time, Bitcoin’s implied volatility is at 63%, that analyst Marcel Pechman has attributed to, among other things, its correlation with the technology stocks. “Regardless of the rationale behind the correlation, it partially explains the recent reduction in Bitcoin [BTC] volatility,” Pechman said.
Bitcoin isn’t the sole cryptocurrency with half the choices setting to expire Friday as the second leading cryptocurrency Ethereum [ETH] has the same numbers expiring this September & later in December this year.
The options market is claimed to possess an impact on the spot exchange but that’s not always the case. For instance, bitcoin price barely moved earlier on 26th June. But it made an enormous move on 27th July, four days before that month’s expiry, when it plowed past $9k to touch $11k within a single day.