Bitcoin and cryptocurrency prices fell this week, wiping out over $ 200 billion in value from the combined cryptocurrency market, despite some bold bitcoin price predictions.
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Bitcoin’s price has dropped around 6% since Monday, going from around $ 52,000 per bitcoin to under $ 46,000 before recovering slightly. Meanwhile, other major cryptocurrencies, including ethereum, Binance’s BNB, solana, cardano, and XRP, also fell, with XRP losing nearly 20% of its value in the past week.
Now, bitcoin traders are poised for option contracts worth over $ 6 billion to expire on New Year’s Eve, one of the largest options expirations this year that could fuel price volatility.
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The big expiration of bitcoin options is thought to trigger a bout of price volatility, with previous large expirations grabbing the attention of investors and analysts signaling expiration as a cause for concern among already nervous investors who may choose to double up on their expiry. risky bets or relax their positions.
The price of bitcoin is currently down by just over 30% from its all-time high in November. While ethereum, the second largest cryptocurrency after bitcoin, fared less badly with a 20% drop from its peak, other smaller cryptocurrencies including Binance’s BNB, solana, cardano and XRP have seen steeper drops.
“While overall bitcoin trading volumes have been consistent, a total of 129,800 option contracts (worth just over $ 6 billion) will expire on December 31, which is believed to be fueling general sentiment of caution in the near future. term, ”Adrian Kenny, senior sales trader at UK-based digital asset broker GlobalBlock, wrote in a statement this week.
According to Skew data first reported by Coindesk.
Bitcoin is thought to move towards its so-called pain point ahead of an option’s expiration, followed by a solid directional move in the days following settlement due to traders pushing the spot price closer to the strike price. at which the highest number of open option contracts expire worthless, creating maximum losses (maximum pain) for option buyers. The maximum critical point for the expiration of New Year’s options is $ 48,000, according to data first reported by Coindesk by the Cayman Islands-based crypto financial services firm Blofin.
Meanwhile, other market watchers nervously watching a collapse in the price of bitcoin, ethereum, Binance’s BNB, solana, cardano, and XRP have pointed to several cryptocurrency exchanges that banned users from China on Friday following the country’s latest crackdown. .
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“The recent Bitcoin recession has come as the year draws to a close and several cryptocurrency exchanges are preparing to implement a ban on users from China,” said Joe DiPasquale, chief executive of bitcoin and hedge fund BitBull Capital. , in the comments via email.
“The selling pressure has increased prior to that ban as users from China try to sell cryptocurrencies and convert to fiat before the December 31 deadline. We can expect some relief as it moves into the new year and a possible impetus for recovery. However, the sustainability of any recovery will depend on market sentiment and underlying dynamics at that time. “
In September, one of the largest bitcoin and cryptocurrency exchanges in China, Huobi, said it was working on the December 31, 2021 deadline “to withdraw existing Chinese user accounts” after a handful of powerful Chinese government bodies issued a stern warning to exchanges.
News of the latest cryptocurrency crackdown in China caused the bitcoin and cryptocurrency market to collapse in the spring, with the ban forcing Chinese cryptocurrency miners to use powerful computers to secure blockchain networks in exchange for coins. just minted, to spread all over the world.