Explained: $1.5 Billion Worth of ETH Options to Expire June 25
Image courtesy of Unsplash (M. B. M.)

Explained: $1.5 Billion Worth of ETH Options to Expire June 25

Ethereum's biggest challenge of the year, in terms of price gain, is just around the corner.
Neither the author, Kai Morris, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

On June 25th, $1.5 billion in ETH options will expire, making this Ethereum’s largest options expiration of the year so far. This has the potential to significantly alter Ethereum’s chart movements, as this is the biggest price-related challenge the network will have faced this year so far.

Expirations Could Trigger a Sharp Movement

To understand why this is so significant, it helps to understand what types of options are expiring. On June 25th, over 600,000 ETH contracts holding 45% of ETH’s total volume in open interest will expire. A large quantity of these contracts are “call options”, which are contracts that allow somebody to buy an asset at an agreed-upon price prior to a certain date. 

A great many of these call options expiring on June 25th are set at $2200.00 or above. If ETH is below this number, then these options will be useless, and this could stifle Ethereum’s price in the weeks and months to come. However, if ETH is at or above this number, then a significant amount of ETH will be bought, which is extremely bullish. 

There are also a lot of “put options” expiring on June 25th– these are contracts that allow somebody to sell an asset at an agreed-upon price prior to a certain date. They are generally a bearish sign, as opposed to call options, which are generally bullish. Many of these put options are set at, or below, $2100.00. 

This means that if, by this date, ETH is below $2100.00, then it will trigger a mass of sales. However, if it is above $2200.00, then it will trigger a mass of buys. For context, let’s take a look at where ETH is at the moment. 

Ethereum One Month Price Chart – Image Courtesy of CoinMarketCap

Ethereum is comfortably resting around the $2500.00 mark. If it can manage to keep around this area up until June 25th, then this is extremely bullish and spells fantastic news for the asset in the months to come. The last time Ethereum dropped below $2200.00 (the number it needs to be above to trigger its put options) was on May 24th. The last time it dropped below $2100.00 (the number it needs to be above to avoid bearish call options) was May 23rd. 

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Ethereum Has Seen This Before

This is not the first time Ethereum has been tested. In fact, it is not even the first time it has been tested this year. On March 26th, a similar situation occurred, with multiple options contracts expiring. Within the days leading up to this, Ethereum fell to $1550.00, although shortly after this date it reached $2,500.00.

All of this action occurred independently from Bitcoin’s movements, meaning that it happened outside the normal flow of the crypto markets. It is possible that similar activity happens again in June, with Ethereum dropping from $2500.00 to perhaps $2200.00 or below, only to rise again after the 25th. 

However, there are differences between March and now. The first being that June’s expiring options equate to $1.5 Billion, whereas March’s equated to $1.15 Billion, making this 30% bigger. Additionally, our knowledge of Ethereum’s future plans are different than earlier in the year. 

For most of the year, people have been expecting Ethereum to release its hotly anticipated ETH 2.0, which would switch the blockchain to proof-of-stake. This was something that many investors were eager to see, as it would make Ethereum both more environmentally friendly, and reduce gas fees and network congestion. Although early this month, Vitalik Buterin revealed that this major upgrade was going to be significantly delayed due to “problems related with people”. 

This was deeply disappointing news as the Ethereum network has been struggling with handling its transactions for practically all of this year. It also shows that there are serious issues with Ethereum’s developers, the likes of which cannot be easily solved. 

This could have brought fear to some investors, meaning that ETH might struggle more this time around than when it did in March. Yet despite the very high fees, Ethereum continued to see use. Demand never ceased, which quite frankly, says a lot. 

What do you think will happen to Ethereum on June 25th? Let us know in the comments below.

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