Bitcoin price stalls in April, but $4.2B options expiry may revive run
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April has been a rough month for bitcoin price. After a remarkably strong start to the year, the cryptocurrency has recently experienced a sharp decline in price. After reaching a high of $20,000 on the 17th of March, the bitcoin price stabilized at $16,000 before the start of April. For the first quarter of the month, the price tracked relatively closely with the broader crypto market, reaching $18,000 on the 1st of April.
The price of Bitcoin stalled in April, but a huge $4.2 billion options expiry may have helped revive it. The upcoming expiration for the BTC options market will likely cause a large drop in the price to avoid a sharp fall. Over $4 billion worth of contracts will expire on April 26th, which represents the highest amount of options set to expire in a single day.
The interesting aspect of this particular option expiration is that the current maximum expiration price is $54,000, which is very close to the current trading price. The ceiling price is the price at which most options become worthless, resulting in a loss of option premium for option holders. Although in this situation, the option writers win.
More than $4.2 billion worth of bitcoin (BTC) option contracts expire on the 29th. April. This deadline comes after bitcoin recovered from $48,000 and is currently trading in the $54,000 range. Total open interest in bitcoin options currently stands at $13.54 billion, of which more than 88% comes from Deribit, the largest cryptocurrency derivatives exchange by both volume and market capitalization.
Cointelegraph discussed this with Robbie Liu, a market analyst at OKEx Insights, the research group for the crypto-currency exchange OKEx. He said the huge drop in itself does not indicate a bullish or bearish market, but it kept prices up when the previous quarterly options expired at the end of March. And after the birth, the blood pressure dropped again.
In fact, if you look at the maximum pain curve, it’s clear that it’s pretty flat at the base. This means that the total economic impact of the $48,000 spill is relatively similar to the economic impact of the $62,000 spill. Sean Fernando, head of risk and product strategy at Deribit, told Cointelegraph: Once the maximum pain threshold is reached, this may result in a smaller deviation from the 54k level.
According to CoinOptionsTrack, the put-call ratio for commitments is 0.69. The put-call ratio describes the traded volumes of put options in relation to the traded volumes of call options. The buyer of a put option has the right to sell the underlying asset at a predetermined price on a specified date, while the holder of a call option has the right to buy the underlying asset at a predetermined price on a specified date. The put-call ratio is often used as an indicator of prevailing market sentiment. If the value is above 1, it is considered a sell indicator, while a value below 1 is considered a buy indicator. Regarding the implications of maximal pain theory in this procedure, Liu said:
The current maximum price for options issued at 30. The April expiration is $54,000, but that is skewed by the $80,000 unattainable calls that currently have the most interest open. Currently, market participants are more concerned about the expiration of the large number of put options at $52,000 and $51,000.
Effect of notification of expiry of an option
Although monthly option expirations are often significant events for the underlying asset due to the high volume of the expirations, the expirations themselves are not unusual events. The different exchanges offer many options with different expiration dates. For example, due to the expiration of 23. April options for 27,000 BTC expired. At its current price, this expiration was worth $1.45 billion. The majority of this amount consisted of approximately 2,500 put options with an exercise price of $50,000 and a maximum exercise price of $58,000.
Liu explained that the impact of the 23. April was immediately seen in the price of bitcoin: Bitcoin came under heavy selling pressure last Friday and the price managed to drop below $50,000 by the time options were settled at 4:00 p.m. HKT [8:00 a.m. UTC]. Then there was a revival. We cannot yet know if the same scenario will occur again.
While this influence is often obvious in the short term, some investors believe it is an overvalued perspective. Scott Melker, a crypto-currency trader and analyst, told Cointelegraph:
The impact of the decline in BTC options and its effect on the market has been much debated. Options are only a small part of the overall market and from a rational point of view are unlikely to affect the spot price, but that hasn’t stopped traders and investors from making poetic speeches about price suppression and maximum pain during expiration week at the end of each month.
Ki Young Joo, CEO of cryptocurrency analysis company CryptoQuant, told Cointelegraph: The market for bitcoin options is still relatively small for an expiration to have a significant impact on the spot price.
While the debate about the influence of the options market on the BTC price continues in the long term, the analysis of the evolution of the price of the underlying asset shows an interesting aspect.
April price dynamics weaker than usual
Although bitcoin was launched on the 21st. In April, the price reached a record high of $64,900, but the price immediately dropped 27% to $46,000. The flagship cryptocurrency has since recovered from that decline. Looking at the dynamics of April alone, the BTC price lost 5% – not expected given April’s performance over the past four years. If it’s the 30th. If there are no major price fluctuations in April, it will be the first time in six years that BTC will end April with a loss.
Louis gave his opinion on the matter and said: Over the past four years, bitcoin has averaged a 30% gain in April. But the market leader gave back much more in the first quarter of this year than in previous years. Not bad for bitcoin to take a break in April after the previous parabolic rise. Fernando spoke in more detail about BTC’s success in the first quarter:
Historically, March is a month of sharp declines. Since that is not the case this year, we can expect April to be another departure from tradition. US President Biden’s plans to raise capital gains taxes this month didn’t help either.
However, BTC’s current annual growth rate is 604%, an unprecedented rate that suggests 2021 has been a banner year for the asset. This is largely due to the increased awareness of bitcoin and other leading cryptocurrencies among retail and institutional investors.
April was no exception in terms of institutional asset approval. On the 21st. In April, Japanese gaming giant Nexus became the last major company to invest in bitcoin. It announced the purchase of 1,717 BTC at a price of $58,226, representing an investment of about $100 million.
Tesla’s first quarter earnings figures show the company made $101 million from the sale of BTC. While most saw this as a positive development that demonstrated bitcoin’s potential viability and liquidity, some skeptics saw it as a sell-off and a more general call to sell bitcoin. Tesla CEO Elon Musk was quick to point out that Tesla sold 10% of its assets to demonstrate the liquidity of bitcoin rather than keeping cash on its balance sheet, and that he personally did not sell any of his bitcoins.
Are whales whales?
One way to measure institutional movement is the outflow of funds from the Coinbase Pro crypto-currency exchange. Typically, an exchange will integrate its deposit portfolios with its OTC desks, through which institutions typically trade, to minimize the impact on cash markets. This release is considered a manifestation of institutional activity in the BTC market.
According to CryptoQuant BTC: According to the Coinbase Pro Outflow Tracker, there were four major Coinbase releases in April. It is possible that these BTCs came into Coinbase’s wallets for over-the-counter transactions.
Tszyu went into further detail: Institutions like Tesla use Coinbase Prime, a brokerage firm, to buy or sell BTC. These are bulk orders that can influence the price of BTC. Coinbase’s premium has been negative/neutral for the past 7 weeks, but has recently turned positive and reached an all-time high a week ago.
The Coinbase premium spread measures the difference in price of BTC on Coinbase Pro and Binance. The larger the spread – and the higher the premium – the greater the buying pressure on Coinbase.
As bitcoin continues to recover from its mid-April decline, it is clear that institutional investor interest in the asset continues to grow, despite recent price volatility. While the upcoming expiration of $4.2 billion in options will not have a major economic impact on option holders, it is highly likely that the downward pressure on BTC after the options expire will deviate from the current maximum price of $54,000.
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