The cryptocurrency market is bracing for a potential surge in volatility this week as massive Bitcoin (BTC) and Ethereum (ETH) options contracts are set to expire on Friday. With Bitcoin options worth $4.2 billion and Ethereum options totaling $1 billion expiring on the crypto derivatives exchange Deribit, market participants are keeping a close watch on how these events may impact prices.
Expiry Could Trigger Market Swings
Options contracts provide the holder with the right, but not the obligation, to buy or sell an asset at a pre-determined price within a specified time frame. The imminent expiration of such a large volume of options often sparks market movement as traders seek to either close profitable positions or roll them over to future expiries. According to Deribit, $682 million worth of Bitcoin options (16.3% of the total $4.2 billion) are currently set to expire “in the money” (ITM)—the majority of which are call options. In-the-money calls are those with a strike price lower than the current market rate, while ITM puts have a strike price higher than the spot price.
The large number of ITM options could increase market volatility as traders with profitable positions may look to lock in gains or adjust their portfolios. A similar situation occurred during the previous quarterly expiry in late September, which also saw heightened market activity.
Bullish Sentiment Despite Looming Expiry
Despite the potential for short-term turbulence, Deribit data indicates a relatively bullish sentiment in the market. The Bitcoin put-to-call open interest ratio stands at 0.62, suggesting that for every 100 call options active, there are 62 put options. This bias toward calls may reflect optimism following Bitcoin’s recent surge toward $70,000—its highest level since July.
Adding to this, Bitcoin’s “max pain” level—the price at which most options expire worthless—is pegged at $64,000. Currently, Bitcoin is trading near $67,000, well above the max pain threshold. According to the max pain theory, prices tend to gravitate toward this level ahead of an options expiry as traders with short positions attempt to push the asset closer to the point where the most options expire worthless. However, with Bitcoin sitting comfortably above $64,000, any downward movement may be limited.
Meanwhile, Ethereum is trading closer to its max pain level of $2,600, suggesting that while Bitcoin may face some downward pressure, Ethereum’s downside is likely capped.
Options Market – A Growing Influence
While the options market is still relatively small compared to the spot market, it has grown significantly in recent years. Monthly and quarterly expiries now see billions of dollars in contracts coming due. However, as of Friday, Bitcoin’s options volume was $1.8 billion, significantly smaller than the $8.2 billion spot volume, according to data from Glassnode.
Also Read: Shiba Inu’s Potential for a 1,124% Surge:Capturing 10% of Bitcoin’s Market Cap – Analyst
Despite its smaller size, the options market continues to expand, and many experts believe its influence will only grow as institutional participation increases. The U.S. Securities and Exchange Commission (SEC) recently approved options tied to spot Bitcoin ETFs, which is expected to further boost the market’s growth. Jeff Park, head of alpha strategies at Bitwise Invest, called this approval “game-changing” and predicts that options tied to spot ETFs will be available for trading as early as Q1 2025.
As the expiration of billions of dollars in Bitcoin and Ethereum options approaches, traders should prepare for potential volatility. While bullish sentiment remains strong, particularly for Bitcoin, the market’s reaction to these expiries could provide a glimpse into how the growing options market is shaping price movements. With institutional interest on the rise and new products on the horizon, the role of crypto options in market dynamics is likely to increase in the coming years.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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