Crypto market at risk of crash ahead of $28b options expiry

The cryptocurrency market is currently facing significant pressure as it prepares for a major options expiry. This event, valued at $28 billion, has traders on edge, particularly as Bitcoin's price has dipped below $87,000, down from a peak of $89,000 earlier in the day. Other cryptocurrencies, including Binance Coin and Dogecoin, have also seen declines of over 3% in the last 24 hours.

Crypto market braces for $28 billion options expiry

As investors anticipate this year’s largest options expiry, market activity has become increasingly cautious. Bitcoin options worth over $23 billion and Ethereum options valued at more than $4 billion are set to expire on Deribit. Currently, Bitcoin's options show a put-call ratio of 0.38, suggesting a bullish sentiment with calls significantly outnumbering puts. The strongest concentrations of bullish positions are found between $100,000 and $116,000, while the maximum pain point, where most options will expire worthless, is positioned at $96,000.

Bitcoin price action points to more cryptocurrency pain

Recent price movements for Bitcoin indicate a troubling trend. A three-day chart reveals that Bitcoin has formed several bearish patterns, which could lead to further declines. Notably, a rising wedge pattern and a bearish pennant have emerged, signaling potential weakness. Additionally, Bitcoin is nearing a death cross, a technical indicator that occurs when the 50-day moving average falls below the 200-day moving average. This pattern may suggest a drop to the November low of $80,000, and a breach below that level could see prices plummet further to around $75,000.

Low trading volume amplifies market uncertainty

The current market environment is characterized by low trading volumes, as many traders are away for the holidays. This lack of activity can lead to increased volatility, especially surrounding significant events like options expirations. The thin volume in the cryptocurrency space heightens uncertainty, making it more challenging to predict market movements. As traders await the outcomes of the options expiry, the market's reaction could be amplified by this lack of liquidity.

Investors prepare for potential volatility ahead

With the impending expiration of a substantial amount of options, market participants are bracing for possible volatility. The events surrounding this expiry could lead to significant price fluctuations, impacting investor sentiment and market stability. As traders adjust their strategies in response to the unfolding situation, the focus remains on how the market will react to the expiry and the implications for future price movements.