On Friday, an estimated $4 billion worth of Bitcoin (BTC) options contracts will expire regardless of the market climate – a figure that could significantly impact the BTC landscape. Past option contract expirations have proven to be instrumental for Bitcoin’s performance over the weekend.
With the upcoming expiration of quarterly option contracts on Deribit, the world’s largest crypto options exchange, 81,052 call options totaling $2.24 billion and 60,261 put options amounting to $1.73 billion are set to expire on March 31-st, as per data from Amberdata.
Investing with put options provides investors the ability to offload assets at a predetermined cost before or on an established date. On the other hand, traders who submit call options have contractual agreements allowing them to purchase possessions for a pre-determined price prior to or by a designated period of time.
Deribit is a major crypto-based derivatives exchange that offers futures, options and perpetual swaps for Bitcoin and Ethereum (ETH). On this platform, each option contract corresponds to one BTC making it an ideal choice for traders looking to make the most out of cryptocurrency trading.
Deribit also stands as the top options exchange in terms of volume and open interest, with more than 60% of all crypto options activity worldwide. During its double-digit owned option activities, it will liquidate quarterly contracts by 08:00 UTC on Friday.
What Does This Mean for Bitcoin?
After Bitcoin’s quick surge to over $29,000 on Thursday, its price swiftly tumbled below $27,800. This abrupt plunge caused the loss of more than $20 billion in market capitalization during the past 24 hours.
At last check, the $543 billion market cap flagship crypto has retraced above the $28K level, printing 1.31% lower intraday.
Deribit reported that 135,000 Bitcoin options contracts expired in late December, yet this amount is significantly lower than the volume set to expire tomorrow. This expiry contributed to BTC’s dip as it was already at a low point from the FTX crash and FUD surrounding Binance. Consequently, ensuring an even greater decrease.
With BTC’s impressive rally since the beginning of this year, especially in recent weeks, there could be a considerable shift from the asset when tomorrow’s BTC options are liquidated.
In preparation for tomorrow’s options expiry, QCP Capital’s trading desk had this to say to its followers:
5/ We are positioning ourselves short vol into tomorrow's expiry, expecting sellers to come in ahead of the big expiry roll tomorrow, and before buyers step in again next week.
— QCP (@QCPgroup) March 30, 2023
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