4 Billion Dollar Option Expires Tomorrow! How Will Bitcoin Price Be Affected?

Cryptocurrency Although markets have had tough weeks due to regulatory pressure, bitcoin continues to rise. Ignoring the lawsuit filed by the CFTC against Binance, BTC broke above $29,000 today for the first time since June 2022.

While Bitcoin is trading at $28600 as of our news hour, we see that the market dominance has increased to 48%, so the rises in altcoins remain limited.

Eyes turned to Friday as investors tried to predict Bitcoin’s next move.

According to data from Amberdata, $4.4 billion of 3-month options contracts on cryptocurrency options exchange Deribit will expire on Friday. Among the contracts that will expire are 81052 call options of $2.24 billion and 60261 put options of $1.73 billion.

The contracts will expire tomorrow at 08:00 UTC (11:00 CEST). Each option on these contracts represents 1 BTC.

It is thought that the expiration of the contracts tomorrow may increase the volatility in the market.

According to Dick Lo, CEO of TDX Strategies, we can see strong moves in both directions as liquidity is weak.

“Tomorrow massive 3-month options will expire. Due to weak liquidity, the price may move sharply in both directions.”

What is an Option? What Is The Effect Of These Options On The Price?

Options contracts are contracts that give the right to buy or sell an asset at a certain price, in a certain amount, at or until maturity.

The counterparty to these contracts can be buyers and sellers, as well as market makers who provide liquidity to the order books. Market makers want to keep their net risks to a minimum while making money from buying and selling here. In times of increased risk, the volatility in the markets increases. Market makers’ willingness to hedge may increase volatility ahead of options expiring on Friday.

bitcoinWhile the rally in , increased the demand for call options, market makers remained in a large negative and “short gamma” position.

If the uptrend in Bitcoin continues before the weekend, market makers will have to balance their short gamma risks and for this they can buy Bitcoin from the spot or futures market. This could lead to an increase in upside volatility.

Griffin Ardern, volatility expert at crypto-asset firm Blofin, said:

“The rally caused by the banking crisis in mid-March left a large amount of negative gamma in the hands of market makers. There are also lots of negative gamma at $28,000 and $29,000. This may force market makers to buy more Bitcoin if the price moves upwards.

When gamma is at its worst and rises or falls by 1%, market makers are forced to buy/sell approximately $50 million worth of BTC to hedge their risk.”