Bitcoin’s Correlation With The S&P 500 Breaks All-Time High, Again
Quick Take
- One month Bitcoin price and S&P 500 correlation is reaching new records of correlation.
- The Bitcoin options market is facing another massive expiry this month.
Bitcoin and the S&P 500 are reaching new records of correlation. Just last week, The Crypto Associate reported on the correlation reaching a new high. However, the correlation has once again reached a new high.
According to Skew, a cryptocurrency data analytics platform, the one-month Bitcoin price and S&P 500 realized correlation rose to a new high of 78.8% on July 8 and the one-year correlation reached a record high of 38.3% on July 10.
The S&P 500, also known as the Standard and Poor’s 500 index, is an index that measures the market performance of 500 large companies. The index is often used to help quantify the direction and status of the overall economy.
Bitcoin Options Market Prepares For Another Massive Expiry
Furthermore as reported previously by The Crypto Associate, the Bitcoin options market is gearing up for another massive expiry following last month’s record $1 billion expiry. According to data by Skew, over 48,000 Bitcoin worth of options are due to expire on July 31 alone.
Bitcoin options allow buyers to buy or sell Bitcoin at a predetermined price, on or before the option’s expiry date. Traders may purchase options to hedge their risk when trading notoriously volatile digital assets.
Option buyers can choose to purchase calls or puts, depending on whether they are bullish or bearish on the cryptocurrency.
Bitcoin calls allow traders to purchase Bitcoin at a predetermined price, also known as the strike price, by a future date (expiry date). If Bitcoin rises above the strike price, the call holder can exercise their option and purchase Bitcoin at a discount from the spot price. If Bitcoin falls below the strike price or doesn’t rise above it, the holder can simply allow the option to expire and minimize their downside to just the premium they paid for the option.
On the other hand, Bitcoin puts allows bearish traders to bet on the cryptocurrency’s price falling. With a put, the trader has the option of selling Bitcoin at the strike price. If Bitcoin falls below the strike price, the trader can sell Bitcoin above the spot price. Similar to call options, the trader can simply decide not to exercise the option if the price action is not in their favor.
While over 48,000 Bitcoin worth of Bitcoin options are due to expire come July 31, traders still have just under three weeks before the deadline rolls around.
Cover image by: Aditya Vyas via Unsplash
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