On August 22 at 16:00 (Singapore time), cryptocurrency options contracts worth over $4.8 billion will expire, with Bitcoin options having a nominal value of $3.83 billion and Ethereum at $948 million. This massive options expiration event may trigger severe short-term market volatility, and investors should be wary of price fluctuations.
Options expiration is often viewed as a 'time bomb' for the crypto market. Before contract expiration, traders may amplify price volatility through hedging or closing positions, causing asset prices to gravitate towards the 'Max Pain Point.' This point refers to the price level at which most contract holders incur the largest losses at expiration. According to data, Bitcoin's maximum pain point is at $118,000, while Ethereum's is at $4,250. This means that if the price fails to effectively break through these levels, some options contracts will become worthless, further intensifying market selling pressure or buying surges.
Bear market sentiment dominates, with Bitcoin's Put/Call ratio as high as 1.31.
Bitcoin options contracts account for the vast majority of this expiration's total amount, with a nominal value of $3.83 billion and a Put/Call ratio of 1.31. This ratio, being above 1, indicates that the number of put options significantly exceeds that of call options, reflecting a cautious or even pessimistic attitude among market participants regarding Bitcoin's short-term trend. The Put/Call ratio is a key indicator for assessing market sentiment; when it exceeds 1, it typically suggests that investors are more inclined to hedge downside risks by purchasing put options rather than betting on increases.
Currently, the price of Bitcoin has fallen about 8% since it reached a high of $124,500 last week, now reported at around $113,500. This pullback is closely related to macro factors, including inflation concerns highlighted in the Federal Reserve's July meeting minutes and a slowdown in consumer spending. Analysts suggest that Bitcoin's support level may be around $112,000, and if this level is broken, the price may further test the $110,000 mark.
The impact mechanism of options expiration lies in 'Gamma hedging.' Market makers need to hedge risks in the spot or futures market when selling options. As the expiration date approaches, this hedging behavior can amplify volatility. For example, if Bitcoin's price approaches the maximum pain point of $118,000, put option holders may close positions for profit, while call options face the risk of expiring worthless. This may lead to increased selling pressure in the short term, pushing prices down. Historical data shows that options expirations of similar scale often trigger 5%-10% intraday volatility. In a similar event in 2024, Bitcoin's volatility surged to over 40% around expiration, ultimately causing a price drop of nearly 7%.
In addition, the recent outflows from Bitcoin spot ETFs have intensified bear market pressure. On August 20, Bitcoin ETF had a net outflow of $316 million, with IBIT seeing an outflow of $220 million. Cumulatively, Bitcoin ETF holdings have dropped to 199,000 coins, indicating that institutional investors are taking profits at high levels or turning to defensive strategies. Despite this, some institutions continue to accumulate, such as Hong Kong's Ming Shing Group, which plans to acquire 4,250 Bitcoins (transaction amount of about $483 million) as a strategic reserve after stablecoin regulation. This suggests that bullish sentiment in the medium to long term has not completely faded, but short-term options expiration may amplify selling.
Bull market signals flash, with Ethereum's Put/Call ratio at only 0.82.
In contrast to Bitcoin, Ethereum options present a completely different picture. Among contracts with a nominal value of $948 million, the Put/Call ratio is only 0.82, below 1, indicating that call options dominate the market, and investors are more inclined to bet on price increases. This aligns with Ethereum's recent performance: although the price pulled back last week, it has rebounded 3% to $4,299 this week. The maximum pain point is at $4,250, and the current price is slightly above this level. If it maintains strength before expiration, it may lead to more put options expiring worthless, releasing buying momentum.
The optimistic sentiment surrounding Ethereum stems from its strong ecosystem fundamentals. Network fees surged 38% week-on-week to $11.2 million, far exceeding competitors like Solana and BNB Chain. This reflects a recovery in DeFi and NFT activities, with the total locked value (TVL) accounting for 60% of the entire chain, nearing $100 billion. The Ethereum spot ETF also attracted a net inflow of $11.801 billion.
Ethereum's futures open interest has surged from $2.8 billion in April (when ETH price was below $1,500) to over $10 billion, with an annual trading volume exceeding $4 trillion, breaking the 2024 record, further supporting the bull market potential. Although the price recently tested the $4,070 support level (down 15.1%, wiping out $817 million in leveraged long positions), the futures premium remains at a neutral level above 5%, and the options skew is only 4%, showing no signs of panic. Exchange ETH withdrawals reached $888 million, indicating a long-term accumulation trend.
Historical experience shows that when the Put/Call ratio is below 1, prices often adjust upwards after expiration. In a similar event in 2023, Ethereum rose 12% a week after the expiration date, and the options expiration may push Ethereum to rebound to $4,700. However, macro risks such as expectations of interest rate hikes by the Federal Reserve or increased target rates by the Bank of Japan may trigger a broad decline in risk assets.
Volatility amplifies, and multiple risks should be taken seriously.
The $4.8 billion options expiration size is not a historical peak, but it occurs during a sensitive market period: Bitcoin's market value has declined, with assets like Cardano and XRP being hit hard. The total market capitalization of the crypto market has receded, with Bitcoin ETFs experiencing net outflows for four consecutive days. Tether (USDT) issued $406 million while redeeming $381 million, indicating a delicate balance in liquidity. Investor strategy suggestions: avoid leveraged trading in the short term and focus on key levels of $114,000 (BTC) and $4,300 (ETH). In the long term, the strong Ethereum ecosystem may drive the ETH/BTC ratio to a new high in 2025. Positive news such as the Brazilian national BTC reserve hearing and the SoFi bank Lightning integration also inject confidence into the market.
This article is for informational purposes only and does not constitute investment advice for anyone.
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