Bitcoin and Ethereum options expiring this week may increase short-term volatility.
BTC and ETH are trading above max pain points, signaling potential downward pressure.
RSI and technicals suggest a pullback or consolidation before any further rally.
As the cryptocurrency markets continue showing signs of strength, traders and analysts are now warning of a potential storm brewing with a massive options expiry event. With over $3.38 billion in Bitcoin (BTC) and Ethereum (ETH) options expiring this week, object volatility may potentially be at a pivotal point. Historically, large expiry events have dramatically affected short-term volatility, and the current setup is no exception.
Bitcoin options alone account for $2.81 billion in notional value across approximately 25,000 contracts due to expire. According to current market data, the Put/Call ratio stands at 1.22, signaling that bearish bets outweigh bullish ones, a potential sign of risk-off sentiment.
Even more telling is the maximum pain level, or the price point where the greatest number of option holders (especially sellers) experience minimal loss. For Bitcoin, that level is at $104,000, significantly lower than its current price near $111,000. This gap may exert gravitational pressure as we approach expiry, potentially dragging BTC toward that zone.
Bitcoin options represent $2.81 billion in nominal value related to around 25,000 contracts that will expire. The current Put/Call ratio is 1.22, suggesting more bearish bets than bullish, which may suggest risk-off sentiment.
More interestingly, it is the maximum pain level, where most traders (especially sellers) experience minimal loss. For Bitcoin, this maximum pain is $104,000, well below its current price of about $110,000. If you combine this with the potential "regression to the mean" thinking, such a gap may create gravitational pressure toward that level as we go into expiry.
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Bitcoin has been riding high following its breakout to a new all-time high, but there are warning signs. The Relative Strength Index (RSI) is creeping into overbought territory, suggesting that momentum may be overextended in the short term.
A pullback toward the $104,000 level aligns with the previous breakout zone, making it a logical support area and a candidate for short-term rebalancing.
On the Ethereum front, roughly 202,000 contracts, representing $570 million in notional value, will expire with a put/call ratio of 1.26 with a similar directional bias towards downside hedging. The max pain for ETH is $2,450, and while ETH is currently above max pain at $2,568, the distance between spot and max pain would imply downticks in the near term.
Ethereum recently broke out from a prolonged downtrend, catapulting from under $2,200 to a recent high above $2,570. The surge was supported by a traditionally bullish signal, a clean break above the 50-day and 200-day moving averages.
However, ETH appears to be entering a consolidation phase just above key moving averages. Price action has been mostly sideways since the breakout, forming a potential bullish flag or pennant, typically a continuation pattern.
The RSI currently sits around 64.6, having retreated from overbought territory (above 70), indicating a cooling in bullish momentum.
A key support zone lies between $2,428 and $2,447, marked by the confluence of moving averages and recent price structure. A drop to this level is a healthy retest, particularly if options expiry creates short-term sell pressure.
Volume has slightly tapered off, hinting at a pause or indecision among traders ahead of Friday's options expiration.
A break below the $2,440 region could open the path to the $2,250 - $2,280 zone, while sustained support above $2,560 would confirm continued bullish strength.
Historically, options expiration often brings "max pain" reversion moves, a price drift toward levels where most options become worthless.
Both Bitcoin and Ethereum are trading above their respective max pain points, creating a situation where price suppression could occur, intentionally or otherwise, through the week.
While the macro trend remains bullish, particularly with Bitcoin recently entering price discovery, the current alignment of overbought technicals and lopsided options positioning increases the probability of short-term pullbacks or sideways consolidation.
This week, BTC and ETH face a $3.38 billion crypto options expiry, making it an important period for both assets. Traders should expect some short-term volatility. BTC and ETH are both technically strong but nearing exhaustion on their momentum indicators, making a return to their maximum pain points ($104K for BTC and $2,450 for ETH) possible.
Still, if the pullback were to occur, it could open up buy-the-dips opportunities for anyone who is confident that the long-term trend is still our friend. Managing risk will be critical since we are in a market environment prepared for liquidity-driven swings.
Also Read: Ethereum Flashes Bullish Signs: Will It Break Past Resistance?