The $400 Million Bitcoin Options Expiry: Analyzing its Potential Impact on the Recent Rally

Written by The Anand Market

Updated on:

$400 Million Bitcoin Options Expiry: Cryptocurrency markets have been displaying a degree of stagnation recently, and investors are now closely watching a pivotal event set to unfold on October 6 – a significant Bitcoin (BTC) options expiry. While the crypto world has been known for its volatility, these moments of expiration can potentially influence market dynamics, and with approximately 14,000 Bitcoin options contracts valued at around $400 million on the line, the stakes are high. However, it’s worth noting that this event is somewhat smaller in scale compared to a recent options expiry.

At the center of this event is the “max pain” point, which is currently set at $27,000. This represents a level approximately $700 below Bitcoin’s current spot price. The max pain point essentially signifies the price at which most open contracts exist, and it’s also where most losses tend to accumulate when these contracts reach their expiration date.

One notable aspect of this upcoming options expiry is the relatively balanced put/call ratio of 0.89. In options trading, a put option is essentially a bet that the price of an asset will decline, while a call option represents a bet on a price increase. This balanced ratio suggests a relatively even distribution between those holding long (call) and short (put) positions, indicating a certain level of market uncertainty.

Over the course of the week, Bitcoin‘s price has displayed an upward trend. Factors like lower trading volumes during Asian trading hours, likely due to holidays, have contributed to this trend. Analysts are also drawing attention to historical patterns, highlighting that October, as well as the fourth quarter as a whole, have often witnessed upward trends in the cryptocurrency market.

the $400 million bitcoin options expiry: analyzing its potential impact on the recent rally
The $400 Million Bitcoin Options Expiry: Analyzing Its Potential Impact On The Recent Rally

However, there’s an intriguing factor to consider: a significant number of traders have positioned themselves in bearish put options. Moreover, liquidity in the market has been shrinking recently, fueling speculation that a substantial market movement, possibly to the downside, could occur in October.

Also Read:   Crypto VC Funding Declines Again in Q3 as Crypto Winter Drags On

But it’s not just Bitcoin in the spotlight during this options expiry. Around 200,000 Ether (ETH) options contracts, with a notional value of $330 million, are also slated to expire on October 6. Similar to Bitcoin, these Ether options exhibit a put/call ratio of 0.87.

Despite the potential significance of these options expiries, their impact on the spot markets remains uncertain. Historically, these events have often come and gone without causing any substantial disruption to the broader market.

As of now, Bitcoin has experienced a 3% retracement from its recent peak at $28,500 and is currently trading around $27,700. Ether, on the other hand, has seen a 6.6% decrease from its Monday peak, with a current price of $1,630.

the $400 million bitcoin options expiry: analyzing its potential impact on the recent rally
Bitcoin Price Year-To-Date. Source: Coingecko

In conclusion, the cryptocurrency market is gearing up for a notable event with the $400 million Bitcoin options expiry on October 6. While historical patterns and the relatively balanced put/call ratio suggest an uncertain outcome, it remains to be seen whether this event will significantly impact the recent rally in crypto prices. As always, investors are advised to proceed with caution and stay vigilant in these volatile markets.