• Speculators have been bullish on Bitcoin ahead of its $6 billion options expiry on Friday.
  • There is more open interest in call options than put, a recurring trend since early 2021.
  • April could be a more volatile month for Bitcoin price than ahead of the options expiry on March 26.

Bitcoin price is about to witness a swell of volatility as around $6 billion worth of BTC options are about to expire on March 26. According to trading data, speculators have been bullish ahead of the record expiry, as there are more open interest "buy" options than "sell" options.

Bitcoin options trading interest has risen sharply

A Bitcoin option is a type of derivative contract that gives the investor the right but not an obligation to buy or sell the cryptocurrency at a set price at or before an expiration date. Compared to trading Bitcoin futures or perpetual swaps, purchasing BTC options offer investors a more cost-effective and low-risk solution to trade the digital currency. 

Without having to trade the underlying asset — Bitcoin — these options contracts allow traders to hedge their risk against spot and futures positions. 

There are two types of options, call – rights to purchase Bitcoin on the assumption that its price will climb – and puts – rights to sell the crypto asset on the assumption that its price will fall. Both types of options contracts will have an expiration date and a strike price — referring to the price of which the investor has the right to buy or sell Bitcoin before or on its expiration date.

Since 2018, derivatives exchange Deribit has been offering Bitcoin options trading. It was only until the last few months that interest has risen sharply, as the pioneer digital currency made new all-time highs reach over $60,000. 

Bitcoin options offer a unique opportunity for investors to get exposure to the underlying digital currency and have become a popular way of speculating on the crypto asset.

Around 100,000 Bitcoin worth around $6 billion is about to expire on March 26, marking a more significant effect on the market than the previous $4 billion expiry set on January 29. 

However, January 29 recorded the largest expiry on record — an astonishing $3.5 billion worth of options contracts expired, which roughly translates to 36% of all open interest in that period. Open interest refers to the total number of remaining Bitcoin options that have not been settled.

Although not every option will eventually result in a trade, speculators have been increasingly bullish on Bitcoin since the start of 2021, as call options have been substantially larger than puts. 

43% of options contracts are already worthless

Some Bitcoin options contracts may become worthless if the underlying cryptocurrency trades above the call strike price or vice versa – below the put strike price.

BTC options open interest by strike price

BTC options open interest by strike price

While the upcoming $6 billion Bitcoin options are about to expire, around 43% have already been deemed worthless. With the remaining open interest, Bitcoin bulls are mainly in control as the cryptocurrency's price surge to its recent all-time high has wiped out 84% of the bearish options.

If the Bitcoin price continues to trade above $52,000, a growing number of put options will lose their value, which increases the advantage for bullish call options.

The positioning of large players in the next month

While anticipating the $6 billion options expiration, looking back at the week of January 29, Bitcoin's price action was magnetized toward the $31,000 region. 

BTC/USD 30-mins chart

Looking at Bitcoin's price action in the past week, a similar trend could be seen as BTC has been centered around the $58,000 level. A large amount of interest has been surrounding the inner and outer gamma bands of the price action. Traders could be hedging positions as the expiration date approaches.

Once the Bitcoin options contracts expire, there is less need to hedge with spot volume, meaning that there could be more volatility following the expiration date – which was a trend seen after the previous January 29 Bitcoin expiry date. 

Looking ahead of the larger players in the next month, traders are very bullish, taking Bitcoin volatility to a higher upswing. 

As governments continue to flood their economies with cash in the form of stimulus payments, worries over inflation and currency devaluation have become a key driver for the boost in the Bitcoin price. With the complexities involved with trading, options volumes are a good indicator of the number of sophisticated investors that have been trading Bitcoin. 

Seamus Donoghue, vice president of sales at crypto-security firm Metaco, said:

Institutional adoption of Bitcoin should drive continued underlying growth for futures and options volumes.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Ripple does not stand a chance against SEC, affirms former securities regulator

Ripple does not stand a chance against SEC, affirms former securities regulator

Former Chief Robert Cohen believes the Securities & Exchange Commission's (SEC) ’s case against payment giant Ripple is key, however the outcome may not be as significant. The regulator is likely to file a motion for reconsideration on losing the case against Ripple. 

More Ripple News

Cardano’s Vasil hard fork launches on testnet positioning ADA price for a breakout

Cardano’s Vasil hard fork launches on testnet positioning ADA price for a breakout

Cardano price is at a point in its journey where things could go either way. As ADA consolidates above a stable support level, things could turn ugly if it breaks or bullish if it bounces. Therefore, investors need to be careful with their decision.

More Cardano News

Why this boring phase of LUNA price will result in handsome returns

Why this boring phase of LUNA price will result in handsome returns

LUNA price has been consolidating tightly since June 30, after undoing the gains seen over the previous week. This small range, suggests that an explosive move is around the corner, although the direction of a breakout remains to be seen.

More Terra News

Argentines take refuge in stablecoins after economy minister resignation

Argentines take refuge in stablecoins after economy minister resignation

Following the resignation Saturday of Argentina's economy minister Martin Guzmán amid an economic crisis, Argentines purchased between two and three times as many stablecoins as they do on a typical weekend, crypto companies in the country told CoinDesk.

More Cryptocurrencies News

Bitcoin: This support level can define BTC’s fate

Bitcoin: This support level can define BTC’s fate

Bitcoin price ended Q2 with a -56% return, which is the first in its 11-year history. On-chain metrics hint at bottom formation but technicals reveal more room to the downside. Bitcoin price has finished the first half of 2022 and things are not looking good. With record negative returns, BTC is likely to continue heading lower, especially if one particular support level is breached. 

Read full analysis

BTC

ETH

XRP