Bitcoin and cryptocurrency prices plummeted this week, wiping out more than $200 billion from the value of the common crypto market — despite some bold predictions about bitcoin prices.
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Bitcoin’s price is down about 6% since Monday, dropping from around $52,000 per bitcoin to just under $46,000 before recovering a bit. Meanwhile, other major cryptocurrencies including Ethereum, Binance’s BNB, Solana, Cardano, and XRP have also fallen, with XRP losing nearly 20% of its value over the past week.
Now, bitcoin traders are preparing for more than $6 billion of options contracts to expire on New Year’s Eve news — one of the biggest options expirations this year that could fuel price volatility.
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It is believed that the expiration of large bitcoin options could lead to a bout of price volatility, with previous large expirations attracting the attention of investors, and analysts pointing to the expiration as a cause for concern among already nervous investors who may choose to either double down on risky bets or relax. their positions.
The price of Bitcoin is currently down just over 30% from its high in November. While Ethereum, the second-largest cryptocurrency after Bitcoin, performed less badly with a 20% drop from its peak, other smaller cryptocurrencies including Binance’s BNB, solana, cardano and XRP saw sharp declines.
“While overall Bitcoin trading volumes have been consistent, a total of 129,800 options contracts (worth just over $6 billion) due to expire on December 31 are believed to fuel a generally cautious short-term sentiment,” Adrienne Kenny, a trader wrote. Big sales at UK digital asset broker GlobalBlock are on a note this week.
About 130,000 bitcoin options contracts — bets on the future price of bitcoin that allow traders to buy or sell the cryptocurrency at a specified price within a specified period of time — are set to expire on Friday, according to Skew data first reported by Quindisk.
It is believed that Bitcoin tends to move towards the so-called maximum pain point in the lead up to options expiration, followed by a strong directional movement in the days after settlement due to traders pushing the spot price closer to the strike price at which it is highest. The number of open options contracts expire worthless – resulting in maximum losses (maximum pain) for the option buyer. The maximum pain point for New Year’s Eve options expiration is $48,000, according to data first reported. Quindisk From the Cayman Islands-based crypto financial services company Blofin.
Meanwhile, other market watchers anxiously eyeing lower prices for Bitcoin, Ethereum, BNB from Binance, Solana, Cardano and XRP pointed to several cryptocurrency exchanges banning users from China on Friday in the wake of the country’s latest crackdown.
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“Bitcoin’s latest pullback comes as the year draws to a close, and many cryptocurrency exchanges are preparing to implement a ban on users from China,” Joe DiPasquale, CEO of bitcoin and crypto hedge fund Bit Paul Capital, said in an email comments.
“Selling pressure was building ahead of this ban as users from China sought to sell cryptocurrencies and convert to fiat before the December 31 deadline. We can expect relief to roll into the new year and a possible recovery attempt. However, the sustainability of any recovery will depend on sentiment. The market and the underlying dynamics at that time.”
In September, Huobi, one of China’s largest bitcoin and cryptocurrency exchanges, said it was working until a December 31, 2021 deadline to “withdraw existing user accounts in China” after a group of powerful Chinese government agencies issued a stern warning to the exchanges.
News of the recent crypto crackdown in China has hit the bitcoin and cryptocurrency market in the spring, as the ban forced miners in China – who use powerful computers to secure blockchain networks in exchange for new coins – to spread around the world.