Why Bitcoin, Ethereum and Dogecoin soared early this morning – the Motley Idiot

What happened

Between 3 a.m. and 4 a.m. ET, Bitcoin (CRYPTO: BTC), ether (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) each saw a pretty sizeable spike. Bitcoin rose from around $ 47,000 per token to $ 48,300 per token. Ethereum rose from $ 3,700 per token to $ 3,800 per token. And Dogecoin rose from $ 0.171 to $ 0.175 during that period.

Today, at 10:30 a.m. ET, these top cryptocurrencies are up 1.4%, 1.9%, and 0.5%, mainly due to that early morning surge.

It appears that the market sell-off towards the end of the year options expiration for Bitcoin and other major tokens is at play with this move. These top tokens have made up for some of their losses from last week, despite staying more than 5% lower in each of the past seven days.

Bitcoin logo on a digital looking background.

Image source: Getty Images.

so what

Similar to the “witch’s hour” events on the stock market, the expiry of options and futures in the crypto world creates year-round volatility. Today, the last day of the year is also the expiration date for $ 6 billion worth of Bitcoin options. A sell-off on this event, followed by a surge from the expiration of the options, has occurred in the past.

It seems that institutional investors are eager to push ahead on this move that has been buying heavily into these top tokens today. Additionally, sources have found that the “max pain” level for Bitcoin (the level at which most options expire as worthless and therefore most profitable to market makers) is $ 48,000. As of 10:30 a.m. ET, Bitcoin is currently trading at around $ 48,000 per token.

What now

The fact that these top cryptocurrencies all followed the movement of Bitcoin this morning suggests a persistently high correlation among the top tokens in the crypto world. As Bitcoin gains or loses value against the dollar, these top tokens, valued in both dollars and bitcoin, appear to be following suit. Accordingly, these recent option-driven moves, mainly from institutional investors, are starting to attract attention.

Many investors expect lower volatility in early 2022 after this option expiration event. However, as we’ve seen over the past few years, volatility is the name of the game in the crypto world. Those looking to increase their exposure to this sector should be prepared for wild fluctuations as the market continues to find the right price for these risky assets.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all reflect critically about investing and make decisions that will help us get smarter, happier, and richer.


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