Another Bitcoin options expiration event will take place this Friday, with crypto options exchange Deribit expiring 135,000 Bitcoin options worth $9.5 billion. But that's not all. Ether worth $5.7 billion His options will also end their journey here.
Expiring crypto options can add upward pressure and lead to volatility issues in the crypto market.
What is Bitcoin Options?
An option is generally known to be a legal contract in which the buyer has the right to purchase an underlying asset at a specific price and at a specific time without incurring any obligations. Here, users can buy at a preset price and purchase at a later date.
In the case of Bitcoin, buyers can buy or sell Bitcoin at a specific price early on. This allows users to predict the price of Bitcoin during fluctuations and make profits.
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There are two other important terms associated with this: calls and puts. If the buyer wants to buy the underlying asset, the right is called a call, but if the buyer wants to sell, it is called a put option.
Why do Bitcoin options expire?
Billions of dollars worth of Bitcoin option contracts will end this Friday with quarterly contract expiration set on the Deribit exchange. Overall, approximately $15.2 billion of contracts will expire, of which $9.5 billion (40% of total Bitcoin options) will be lost, with the remainder going to Ether.
The Deribit exchange holds over 85% of all market options, with 1 contract option equaling 1 Bitcoin. This is one of the biggest expirations for Deribit, wiping out 62% of total domestic open interest (the dollar value of active contracts), 40% of which is 43% of total Bitcoin options. Ether sum.
It is relatively lower than the end-of-month expiry for the past two months. The January amount was approximately $3.74 billion, while the February amount was $3.72 billion.
How will this affect the value of Bitcoin?
According to Luuk Strjers, Chief Commercial Officer at Deribit, this large amount of option expiry on ITM (in-the-money) will create upward pressure and increase volatility in the crypto market. .
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These call expiry ITMs typically cause prices to fall below current market rates. Therefore, in the case of Bitcoin, buyers end up getting 1 Bitcoin at a lower price than the spot market. As a result, the buyer can profit from this purchase. This is possible only if the option is exercised by Friday. Once the expiration period ends, the value will be pushed to maximum pain.
Bitcoin is currently trading around $70,000, and as mentioned above, 40% of Bitcoin options are set to expire ITM. That would lead to the biggest problem for Bitcoin: $50,000. Here, the buyer will suffer a loss due to the biggest problem.
conclusion
Several Bitcoin options have already occurred this year, and another will occur tomorrow. This is scheduled for 8:00 UTC (Universal Coordinated Time) and will result in the expiry of the 135,000 Bitcoin option. The volatility of the virtual currency market may increase. However, it is predicted that the bullish nature of the market may remain unchanged.
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