The hidden force behind Bitcoin and Ether price swings: Options expiry

Options expiry significantly influences the volatility of Bitcoin and Ether prices as traders adjust their positions around large contracts. Options are contracts that provide the right to buy or sell BTC or ETH at a predetermined price, and as they near expiry, they can lead to substantial market movements. The interplay between call and put options indicates market sentiment, where a put-call ratio above 1 suggests a bearish outlook, while below 1 points to bullish expectations. Max Pain theory indicates that prices may gravitate toward points where the highest number of options expires worthless, amplifying manipulation risks. Historical data shows a correlation between large options expiries and volatility; for example, a June 2021 expiry of over $4 billion in options resulted in a significant increase in market volatility. Traders are advised to monitor key metrics, hedge positions, diversify, and utilize advanced tools to navigate the heightened activity during these periods. Understanding these concepts can empower traders to manage risks more effectively amid ongoing fluctuations in the crypto market.

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