Today marks the expiration of over $3.3 billion worth of Bitcoin (BTC) and Ethereum (ETH) options, following the release of lower-than-expected US Consumer Price Index (CPI) and Producer Price Index (PPI) data.

The expiry of these options is anticipated to impact the prices of these digital assets and the overall volatility of the crypto market. Deribit reported that more than $2.76 billion in Bitcoin options will expire, with a maximum pain point of $100,000. This batch consists of 26,543 contracts, showing an increase from the previous week's 25,925 open interest. The put-to-call ratio of 1.02 indicates a prevailing bearish sentiment among traders.

For Ethereum, $569.42 million in options are set to expire, involving 219,986 contracts – a significant rise from last week's 164,591 contracts. The maximum pain point for Ethereum is $2,300, with a put-to-call ratio of 1.36, suggesting a bearish outlook for ETH.

The concept of the "maximum pain point" in crypto options is crucial as it denotes the price level at which option holders experience the most significant financial discomfort. Currently, Bitcoin is trading at $103,912, while Ethereum is at $2,572, indicating that both assets are above their strike prices, with a prevailing bearish market sentiment.

After the expiration, markets typically lean towards the strike price or max pain level to reduce payouts. Analysts have noted a neutral BTC skew, indicating potential interesting price action. Additionally, recent rejection from the $105,000 threshold in Bitcoin highlights market caution, leading to defensive strategies and profit-taking on long calls.

The expiration of these options coincides with the release of US CPI data for April, which revealed a cooling inflation rate of 2.3%, the lowest since February 2021. Similarly, April PPI inflation decreased to 2.4%, falling below the expected 2.5%. This unexpected data shift may prompt market underreactions, with lower inflation potentially pressuring the Fed to consider rate cuts sooner than anticipated.

Lower inflation usually favors risk assets like Bitcoin and Ethereum, increasing demand for crypto options as investors seek leveraged exposure. Despite short-term crypto price volatility following the CPI and PPI data, options traders have witnessed heightened activity, increased volumes, and tighter spreads. While option expirations can trigger abrupt price swings, the market tends to stabilize the following day, mitigating initial fluctuations.

Traders are advised to conduct thorough technical and sentiment analysis before engaging in investments within this volatile environment.