Why Bitcoin, Ethereum, and Dogecoin Spiked Early This Morning

What happened

Between the hours of 3 a.m. and 4 a.m. ET, Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) each saw a rather sizable spike. Bitcoin went from around $47,000 per token to $48,300 per token. Ethereum surged from $3,700 per token to $3,800 per token. And Dogecoin rose from $0.171 to $0.175 over this time frame.

Today, these top cryptocurrencies are up 1.4%, 1.9%, and 0.5% as of 10:30 a.m. ET, largely as a result of this early-morning spike.

It appears that the market sell-off heading into the end-of-year options expiry for Bitcoin and other key tokens is at play with this move. These top tokens have recovered some of their losses from the past week, though each remains more than 5% lower over the past seven days.

Image source: Getty Images.

So what

Similar to the “witching hour” events seen in the stock market, options and futures expiry in the crypto world provides for periods of volatility throughout the year. Today, being the last day of the year, also marks the expiry date for $6 billion of Bitcoin options. A sell-off into this event, followed by a rise coming out of the options expiry, has historically taken place.

It appears institutional investors eager to front-run this move bought heavily into these top tokens earlier today. Additionally, sources have noted that the “max pain” level for Bitcoin (the level at which most options expire as worthless, and therefore the level most profitable for market makers) is $48,000. As of 10:30 a.m. ET, Bitcoin currently trades right around $48,000 per token.

Now what

The fact that these top cryptocurrencies all followed Bitcoin’s move this morning suggests a continued high correlation among top tokens in the crypto world. As Bitcoin gains or loses value to the dollar, these top tokens, which are priced in both dollars and Bitcoin, appear to be following suit. Accordingly, these recent options-driven moves, largely from institutional investors, are starting to get noticed.

Many investors are expecting to see less volatility in early 2022, following this options expiry event. That said, as we’ve seen in recent years, volatility is the name of the game in the crypto world. Those looking to add exposure to this sector should be prepared for wild swings as the market continues to find the correct price for these risk assets.

10 stocks we like better than Bitcoin
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Bitcoin wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of December 16, 2021

Chris MacDonald owns Ethereum. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Be the first to comment

Leave a Reply

Your email address will not be published.