Bitcoin and Ether options worth $2.4B set to expire May 3, max BTC pain at $61K

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Bitcoin (BTC) and Ether (ETH) options contracts worth a combined $2.4 billion are set to expire on May 3, which could lead to increased market volatility.

A Bitcoin options contract is a derivative contract that allows investors to speculate on Bitcoin price movements without owning Bitcoin itself.

There are two types: call and put options. Call options give investors the right to buy a cryptocurrency at a specific price before a certain date. Put options, on the other hand, allow investors to sell a cryptocurrency at a particular price before the expiry date.

Investors often use the put/call ratio as a metric to assess the general state of the market. If traders are purchasing more puts than calls, it is considered a bearish sign, and if they are purchasing more calls than puts, then the market sentiment is considered bullish.

A put-to-call ratio below 0.7 is considered bullish, while a ratio of more than 1 is regarded as a bearish indicator.

Related: US lawmakers urge SEC to approve Bitcoin options trading

On May 3, a total of 23,367 Bitcoin contracts worth $1.39 billion are set to expire. Data from the Deribit exchange reveal that the put-to-call ratio for Bitcoin options contracts is currently at 0.5, with a maximum pain point of $61,000. The maximum pain point refers to the price at which the asset will cause financial losses to the greatest number of holders.

Bitcoin options expiry. Source: Deribit

Similarly, a total of 334,248 Ether contracts with a notional value of $1 billion are expected to expire on Friday as well. These expiring contracts have a put-to-call ratio of 0.37 and a maximum pain point of $3,000.

Ether options expiry. Source: Deribit

The expiry of options contracts has historically been followed by short-term price volatility in the spot crypto market. Bitcoin and Ether have experienced bearish pressure in the past couple of weeks.

The BTC price fell below $60,000, marking an almost 20% weekly correction post-halving. The Ether price also fell below $2,900. The crypto market often bounces back from the options-led volatility within days of expiry.

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