Will Today’s “Quadruple Witching” Trigger a Bear Trend For Stocks and Bitcoin?
Turbulence in the stock market is expected to pick up starting today, due to something called “Quadruple Witching.” Will the same sudden spike in volatility put Bitcoin under the same spell?
What Is A Quadruple Witching in the Stock Market, and Why Does It Matter?
Today in the stock market is known as a Quadruple Witching. The ominous-sounding event comes once per quarter on the third Friday of the months of March, June, September, and December.
It signifies the expiration of stock market futures, stock index options, single-stock futures, and single-stock options all at once.
Quadruple witching, occurs on the third Friday of the month of every quarter, in March, June, September, and December, and refers to the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock-futures.
With so many contracts expiring simultaneously, it leads to a day of increased trading volume. The sudden surge of trading volume can trigger unexpected volatility, which is why it bears the “witching” connotation.
RELATED READING | FADING BITCOIN VOLATILITY VERSUS NASDAQ MAY SIGNAL BULL MARKET IS HERE
Witching is in reference to the “witching hour” which is an old wive’s tale referencing that witches come out after midnight to cause chaos and turmoil.
The event taking place today could cause similar chaos and turmoil across the already strained stock market.
Days ahead of the last Quadruple Witching, the stock market collapsed, dragging Bitcoin down with it. Both asset classes have made a strong, steady, V-shaped recovery, but with much of the rally due to stimulus money and a sudden influx of speculators, a deeper collapse isn’t an impossibility.
Many analysts are predicting a day of reckoning in the stock market. That day could be soon with the Quadruple Witching here. And if stocks tank again, how may this impact Bitcoin?
Bitcoin BTCUSD Versus S&P 500 Correlation Chart | Source: TradingView
Over 60% of Bitcoin Contracts Expire Next Week
The Quadruple Witching may have an impact on the stock market, and through continued correlation, it also could help Bitcoin make a decision sooner than later.
However, if today’s event doesn’t contain enough contracts expiring to knock Bitcoin free from its consolidation range, then there’s a chance next Friday will do the trick.
While today is the stock market’s big day of contracts expiring all at once, 60% of all open interest in Bitcoin will expire on Friday, June 26th.
A week ahead of the US Independence Day holiday, we may finally get some fireworks in Bitcoin price action once again.
After trading sideways for almost two full months, traders are preparing for the asset’s next major move. Due to how close Bitcoin is to important resistance and due to the asset’s halving now passed, open interest is at record highs.
With so many contracts expiring over the next week or so, a break in the sideways action is bound to occur.
Featured image from Shutterstock. Charts from TradingView.