Bitcoin (BTC) and ether (ETH) continued to trade within recent price ranges as quarterly options expiry and a strengthening dollar index did not unsettle investors.
As of 08:00 UTC, around 150,000 BTC options contracts worth around $4.5 billion and 1.2 million Ether contracts worth $2.3 billion were active on Deribit, the world’s leading crypto options exchange away. Deribit controls over 85% of global crypto options activity.
The process was crucial considering that market makers were “long gamma” in BTC options and could have contributed to spot price movements with their hedging activities. However, the largest cryptocurrency by market value traded listlessly between $30,000 and $31,000 in the days leading up to the deal and remained trapped in the tight range thereafter, only up 1% to $30,700 as of 10:40 UTC on the day -dollar, CoinDesk data shows.
The popular theory is that price acts like a magnet leading up to the expiry date, with option sellers – typically large traders – attempting to push prices down to this level in order to inflict the greatest possible loss on buyers. During the bull market of late 2020 and early 2021, bitcoin steadily moved towards the maximum pain point before expiry and returned to gains after settlement.
After the deadline, the magnet has disappeared. Thus, if other factors remain unchanged, cryptocurrencies could continue their uptrend.
“BTC Max Pain, at a significantly reduced $26.5k level, may mitigate prevailing downward pressure on prices post-expiration,” said Luuk Strijers, Chief Commercial Officer at Deribit.
The maximum pain point for Ether Options expiring in June was $1,700. Ethereum’s native token was changing hands around $1,900 at press time, up 2% on the day and its biggest rise in more than a week.
The Dollar Index (DXY), which tracks the US currency’s value against major currencies including the euro, hit a two-week high of 103.50 before press time, extending a two-day winning streak sparked by positive economic data releases. Notably, the weekly jobless claims figure released Thursday showed that the number of Americans filing new jobless claims fell last week, the sharpest in 20 months.
At 12:30 UTC on Friday, the US Bureau of Economic Analysis is due to release the Federal Reserve’s preferred measure of price pressures, the core personal consumption spending index, or the core PCE deflator.
The data should show that the core elements of inflation remain stubborn, strengthening the case for longer-term higher interest rates in the US and contributing to the dollar’s strength.
According to economists polled by FactSet and published by Barron’s, the index is likely to have risen 0.4% mom in May after rising 0.38% in April. Year-on-year growth is expected to be 4.7%, unchanged from the previous month.
Traders could also look to the personal spending and income numbers in the US, which are released along with the core PCE.