How US Inflation Data and $3.3B Options Expiry Impact Bitcoin and Ethereum

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$3.3B Options Expiry Impact Bitcoin and Ethereum

The crypto market is bracing for significant activity as over $3.3 billion in Bitcoin (BTC) and Ethereum (ETH) options expire today. This event follows the release of lower-than-expected US inflation data, with the Consumer Price Index (CPI) cooling to 2.3% and the Producer Price Index (PPI) falling to 2.4%. These developments are set to influence price movements and market sentiment for both digital assets.

The Scale of Today’s Options Expiry

According to Deribit, the largest crypto options exchange, more than $2.76B in Bitcoin options are expiring today, involving 26,543 contracts —a slight increase from the previous week’s open interest of 25,925 contracts. The maximum pain point for Bitcoin options is $100,000, with a put-to-call ratio of 1.02, indicating slightly more bearish sentiment among traders.

Expiring Bitcoin Options. Source: Deribit

For Ethereum, $569.42 million in options are set to expire, covering 219,986 contracts, up significantly from last week’s 164,591 contracts. Ethereum’s maximum pain point sits at $2,300, with a higher put-to-call ratio of 1.36, reflecting a stronger bearish outlook.

“BTC skew is neutral…price action could get interesting,” noted analysts at Deribit.

Expiring Ethereum Options. Source: Deribit

The “maximum pain point” is critical because it represents the price level where option holders experience the most financial discomfort. Currently, Bitcoin is trading at $103,912, while Ethereum is exchanging hands at $2,572, both above their respective strike prices, signaling potential downward pressure post-expiry.

US Inflation Data: A Catalyst for Market Sentiment

The recent US CPI and PPI data have injected optimism into risk assets like Bitcoin and Ethereum. With inflation cooling to its lowest levels since February 2021, markets are speculating that the Federal Reserve may cut interest rates sooner than anticipated.

“Rate cuts are back in play, markets aren’t ready for what’s coming,” said crypto analyst Merlijn the Trader.

Lower inflation reduces pressure on monetary tightening, enhancing liquidity in the market. This environment typically boosts demand for leveraged exposure through options, driving up call option premiums. However, analysts warn of short-term volatility as traders adjust positions.

What Traders Should Expect

While options expiries can cause sharp price swings, these effects are usually temporary. Markets tend to stabilize within a day, offsetting initial fluctuations. Analysts note that Bitcoin’s rejection from the $105,000 threshold reflects an overextended market, with defensive strategies emerging as traders take profits on long calls and rotate into safer positions.

“Several traders are taking profits on long calls and rotating into more defensive positions as they feel everybody rushed in,” observed analysts at Greeks.live.

This cautious approach highlights the uncertainty surrounding the market’s immediate direction.

Final Thoughts

Today’s $3.3 billion options expiry, combined with the impact of cooling US inflation, sets the stage for heightened volatility in Bitcoin and Ethereum. While the maximum pain points suggest potential downward pressure, broader macroeconomic trends, such as expectations of rate cuts, could provide support for risk assets.

Traders should carefully analyze technical indicators and market sentiment before making decisions in this volatile environment. As always, the crypto market remains unpredictable, requiring vigilance and strategic planning.

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