$3 Billion in Bitcoin Options Expire Today—Here’s Why It Matters

By Mat Di Salvo

Roughly $3.6 billion in Bitcoin options contracts across some of the largest derivatives exchanges will expire later today. What does that mean for the price of the biggest digital coin?

Most of the options are on Deribit, which has $95 million, and CME, which has $1.6 billion worth of expiring contracts, according to Coinglass and CME data.

In the world of derivatives, options allow traders to speculate on or hedge against the volatility of an asset. With Bitcoin options, traders purchase contracts that allow them to buy or sell the asset at an agreed-upon price at a later date.

That means they will have the option to buy or sell it at the predetermined price—regardless of how much the price has changed—by the time the contract expires.

Traders don’t have to buy Bitcoin when their contract expires. As the name of the contracts implies, it's just an option. Traders that know they won’t want to exercise their option at expiry can also roll them forward, or close them out now at market price and open a new contract that expires at a future date.

Options expiries don’t always guarantee volatility, experts have told Decrypt. If the options contracts expire without being exercised, then the price of the asset is unlikely to move.

As for this month’s options contracts, the max pain—or the price at which the highest number of contracts will expire at no profit—is $48,000, Derebit data shows. This means that if the price of BTC touches $48,000 before they expire, a large number of traders would end up incurring a loss.

The prevailing prediction among analysts is that if Bitcoin can stay above $48K when this month's options expire, traders will exercise their contracts and use this as an opportunity to take profits. In other words, BTC could see a fair bit of selling pressure today.

Coinglass data shows that, overall, traders are feeling pretty optimistic. For all Bitcoin open interest, regardless of expiry date, 62% are calls, meaning that traders who’ve entered the contract are bullish that the price of Bitcoin will be higher by the expiry date. While 38% are puts—a bet on the price of the asset dropping.

Today’s $3 billion expiry is nothing compared to the value of contracts that expire on March 29.

For example, there’s $95 million worth of options expiring on Derebit today. But there’s $4.7 billion worth of March contracts on the exchange.The same can be said of open interest on CME, which has $1.6 billion worth of contracts expiring today and nearly $18 billion expiring at the end of March.

That’s likely because traders are expecting the Bitcoin halving to spur a lot of price action for BTC. The Bitcoin halving reduces the reward paid out to Bitcoin miners for validating transactions. This time it will go from 6.5 BTC to 3.25 BTC. In the past, the increase in scarcity has usually kicked off a price rally for Bitcoin.

BTC is currently trading for $51,000.57, a 24-hour drop of 1.7%, according to CoinGecko. Over the past seven days, the biggest digital coin has barely budged.

The price of the asset has shot up since the start of the year, when it was trading for $44,168. The approval of spot Bitcoin exchange-traded funds (ETFs) on January 10 have led to a flood of capital into the crypto space.

Edited by Stacy Elliott.

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