In-Depth: $5.7 Billion of Bitcoin Options Set to Expire on Friday

The flagship cryptocurrency shed more than 6% and dropped to under $48,000 on Tuesday. Some experts associate this year-end price turbulence with the upcoming massive options expiration event, which is scheduled to happen on the last day of 2021.

Almost $6B Options Contracts to Expire Friday

A total of 129,800 option contracts worth almost $6 billion are slated to expire on Friday, marking one of the largest Bitcoin options expiration of the year. A look at available data reveals that the majority of these contracts are call options, which are contracts that allow somebody to buy an asset at an agreed-upon price prior to a certain date. 

According to Blofin, a digital assets management firm, the maximum pain price for Friday’s option expiration is $48,000, which is the strike price with the most open options contracts. In other words, $48,000 is a strike price that would cause losses for the majority of options holders at expiration.

Nevertheless, a large number of the call options expiring on December 31st are set at $50,000. If institutional traders, who are pushing towards the $48,000 strike price to make the highest number of open options contracts expire worthless, manage to keep the price below $50,000, these options would be worthless at the time of expiration.

However, if BTC is at or above $50,000 at the time of expiration, then those calls would be in a profit and a significant amount of BTC will be bought, which would be bullish. Meanwhile, there are also a significant amount of call options at $58k and $60k strike prices, which are likely to be useless as there is very little possibility of an end-of-the-year rally. 

Notably, Pentoshi, a pseudonymous analyst, has taken it to Twitter to show that Bitcoin’s current price movement is very similar to when it was trading at $64k and $69k. On those occasions, Bitcoin consolidated for some time only to plunge later. “Have a feeling we get some really great discounts 22′,” they said. 

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All in all, since this massive options expiration has the potential to drastically alter Bitcoin’s course of action, it has generated little uncertainty among traders, fueling end-of-the-year price volatility.

At the time of writing, Bitcoin is trading at around $47,100, down by more than 4% over the last 24 hours. 

Do you think Bitcoin bulls would be able to reclaim the $50,000 level prior to December 31? Let us know what you think in the comments below.