A “quadruple witching” took place across the stock market

Why this “quadruple witching” was such an exciting event for the Bitcoin community and investors?

On June 19, 2020, a “quadruple witching” took place across the stock market. First, let’s address what a “quadruple witching” is.

A Witching Day or Hour is every third Friday of every third month (March, June, September, and December) when all stock options and futures expire. The “quadruple” refers to four stock agreements that expire:

• stock index futures (buying/selling stocks on a future day);
• stock index options (the right to buy/sell stock on financial indexes for a certain period);
• stock options (the right to buy a stock of the issuing corporation at a specific price within a stated period);
• single stock futures (trading stocks in the future at a price agreed-upon today).

As a result of the witching day or hour, the market volatility and trading volume increased significantly (up to 50–60%). The high-risk players who are involved in derivatives trading (institutions with major options on hand adjust the market to their liking) also draw in the normal trading processes.

Traders randomly close their positions — without worrying about statistics and world events, or even at the cost of the futures. The main thing is to close deals before the end of bidding.

Why was the “quadruple witching’’ such an exciting event for the Bitcoin community and investors this time? This is due to events following that day. It was expected that more than 114,700 Bitcoin options (notional value of over $1 billion) were set to expire on June 26, 2020. That was 60% of all open interest across the entire cryptocurrency market.

Open interest, due to how long Bitcoin had traded sideways for, reached its record highs while Bollinger BandWidth and other indicators measuring volatility reached unusual lows for the asset class.

A number of skeptics and speculators expect a big move after the largest chunk of Bitcoin options derivatives contracts expired. According to the last two years of the bear market, Bitcoin’s price has consolidated for 5 weeks. The previous time when Bitcoin traded sideways for longer than 5 weeks resulted in a price crash to $3,000 in November 2018.

Bitcoin is now trading around $9,295 as of 20:00 UTC (4 p.m. ET), July 6, gaining 2.7% over the previous 24 hours. Still, traders point out volatility has been absent in the bitcoin markets. A partner at Paris-based cryptocurrency trading firm ExoAlpha, Elie Le Rest said “Since the bitcoin halving on May 12, the digital asset markets have gone nowhere for six weeks in a row. Volatility has collapsed abruptly and bitcoin remains stuck between $8,200 and $10,500.”

It is not clear at the moment when bitcoin will finally pick an up or down direction for a new trend after “quadruple witching day”. When it does breakout, it typically results on average a move of 20% or more each time.

Referring to the Micky news, a 20% move from current levels, would take Bitcoin price to either $7,500 or $11,250. A fall below would give crypto investors a chance to buy Bitcoin at lower prices for perhaps the last time before a new uptrend begins.

A break above $10,000 would be a signal that the uptrend has already begun, and could cause a wave of FOMO similar to that which was seen in mid-2019 when Bitcoin rose from $3,000 to $14,000.

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