The financial industry will collectively call it quits on Q3 2021 in less than ten days, and the market couldn’t be more indecisive right now. There is currently an air of uncertainty, as prices have failed to break through immediate resistance.
Both Bitcoin and Ethereum have managed to hold their prices above their immediate support levels of $42,000 and $3000, respectively, but this support may be tested soon. Keeping that in mind, another key expiry date for both assets is approaching on September 24th, which could influence the trend direction for Q4 2021.
Expiration of Bitcoin and Ethereum Options
According to Skew data, 73.7k Bitcoin Options in Open Interest are about to expire on September 24th. It is one of the largest expiries in 2021, with a net valuation of close to $3.2 billion at press time.
In the case of Ethereum, 492k ETH options will expire, with a total value of $1.5 billion as of press time. One of the most notable similarities between BTC and ETH options at the moment is that the vast majority of them are Call Buys. This means that if the higher targets are not met, a greater number of contracts will be invalidated.
The ramifications on a stagnant market can be huge, as target failure could result in a temporary drop in Bitcoin and Ethereum prices after the expiry. Bitcoin Options were still in the green at press time, as BTC remained above $44,000, but it was slipping below that range. Prices for Ethereum are currently around $3000, which is a significant drop from strike prices of around $3300-$3400 on September 24th.
Will lower Implied-Realized Volatility help to mitigate losses?
At the time of publication, there was some comfort in the current build-up between Implied and Realized Volatility. The necessary trader sentiment suggested that there is still room for more price movement in the charts, with Implied volatility still leading Realized volatility. Given that the price is falling alongside the volatility structure, it is mildly bearish.
However, in the past, Realized Volatility has reached a low that has triggered a bullish recovery. The first time will be in January 2021, and the second time will be in April 2021. Given that Bitcoin retests support at $42,000 and Ethereum falls below $3000, Bitcoin’s growth margin will be wide going into Q4 2021.
However, if Realized and Implied Volatility continue to fall, bullish momentum will be slowed, and the market may continue to drop levels in the absence of trader sentiment.