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$1 Billion in Bitcoin Options (BTC) expire today, how will that affect the price?

  • $1 billion in Bitcoin option contracts will expire today, Friday, June 26. Their expiration is expected to increase the volatility of the BTC price.
  • New data from Skew indicates that the BTCUSD ratio for put/call options is trending downward.

The largest expiration of Bitcoin (BTC) option contracts, estimated at $1 billion or 114,700 BTC, will occur today, Friday, June 26. There is a lot of expectation in the market about how this event will impact Bitcoin (BTC) and among the analysts there is no consensus about the path that the cryptocurrency will take.

According to the data collection firm, Skew, the open interest in Bitcoin options has increased to over $500 million by the end of 2019. In the first quarter of 2020, the open interest had two drops. In early January and then in March, near the “Black Thursday”. However, it has since recovered and in less than two months reached a record $1 billion in mid-May, as shown below.

Bitcoin BTC

Source: https://analytics.skew.com/dashboard/bitcoin-options

Bitcoin BTC

Source: https://analytics.skew.com/dashboard/bitcoin-options

Option contracts are a financial derivative that gives their buyers the option to buy or sell (call/put) an asset, in this case the Bitcoin, at a preagreed price. Buyers with a call option can buy Bitcoin at a lower price than the spot market. The opposite occurs with buyers of the put option, which allows them to sell Bitcoin at a higher price for the duration of the contract.

In this market, buyers with both options try to influence BTC price at their convenience. In such a dynamic, the volatility of the asset can increase especially close to the days before the contracts expire. However, the data for this time shows a different scenario.

Bitcoin (BTC) price worst case scenario

Again, data from Skrew show that the realized volatility in Bitcoin price is at its lowest point since the beginning of April. On the other hand, the implied volatility has been stable since the beginning of June and has not been altered by the expectation of the expiry of the options contracts. In the chart below, it can be seen that both realized and implied volatility coincide for the first time since April.

Bitcoin BTC

Source: https://analytics.skew.com/dashboard/bitcoin-options

It is still necessary to wait to determine if the volatility in Bitcoin price will increase because of the settlement of the options. However, as one trader on Twitter states, the expectation of a market impact may outweigh the reality. The trader stated that the largest volume for call options is between $10,000 and $9,000, a range in which Bitcoin has moved over the past few weeks. Therefore, the trader estimates that the worst case scenario for the BTC price is that it moves sideways.

Finally, the put/call option radius in the BTCUSD has been reduced since last week. This indicator points out that the number of call buyers equals the number of put buyers. This indicates that investors are bullish about a rise in the BTC price in the coming weeks.

Bitcoin BTC

Source: https://analytics.skew.com/dashboard/bitcoin-options

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Reynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

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