Isabella García
The Bitcoin (BTC) market is expected to see increased activity in the next two days as options contracts worth billions of dollars are set to expire this Friday at 08:00 UTC, according to a statement from Deribit shared with PRIME X on Wednesday. At the time of writing, around 90,000 BTC options contracts, valued at $5.8 billion, along with $1.9 billion worth of Ether (ETH) options, are nearing settlement. Each options contract on Deribit represents one BTC or one ETH. Deribit remains the dominant platform for cryptocurrency options, handling over 85% of the global market.
Of the $5.8 billion in Bitcoin open interest, roughly 20% is classified as “in-the-money,” meaning the strike prices are favorable compared to Bitcoin’s current market price. The same trend is observed in Ether options. For call options, “in-the-money” refers to a strike price below the market value, whereas for put options, it implies a higher strike price than the market rate. Both situations allow traders to buy or sell for a profit, leading to potential volatility in the market.
Deribit CEO Luuk Strijers told PRIME X that the upcoming expiration of BTC options, with 20% in the money, could lead to increased volatility as traders adjust their positions. This may involve closing existing trades or rolling them over to future expirations, which could impact the market price. Experienced traders often roll over profitable positions to extend their holding period and capitalize on potential gains.
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What’s Next Now?
Looking ahead, market activity is expected to remain strong, especially with the potential for institutional adoption driven by the U.S. SEC’s approval of options linked to BlackRock’s Bitcoin ETF (IBIT). Strijers noted that while the SEC has approved these options, approvals from the OCC and CFTC are still pending and are unlikely to happen this week.
The pricing of options set to expire in the coming months suggests a bullish market sentiment. Strijers pointed out that the put-call skew for both BTC and ETH options is negative after September’s expiration, signaling optimism as call options, which benefit from price increases, are priced higher than put options, which serve as downside protection.
This bullish sentiment aligns with broader expectations that renewed interest rate cuts by the U.S. Federal Reserve and similar moves by other central banks, including the People’s Bank of China, will support demand for Bitcoin and Ether. Analysts at Bitfinex believe that if Bitcoin surpasses $65,200, it could spark further momentum in the market.
More About Max Pain Effect
One factor to watch is the “max pain” level, the price at which options buyers would face the largest losses upon expiry. In traditional markets, this level often acts as a magnet, with option sellers, typically large institutions, attempting to influence the spot price around this point. For Bitcoin’s upcoming expiry, the max pain level is set at $59,000, about 8% below the current spot price. According to Presto Research analyst Rick Maeda, this could create some downward pressure as the expiration date approaches.
While the max pain theory has gained traction since 2021, some market observers argue that the cryptocurrency options market is still relatively small to significantly impact Bitcoin’s spot price.
