Markets are anticipating $8.1 billion of options expirations, and so far, the bullish side appears to be winning. Options typically expire monthly, with the biggest impact usually occurring on the last Friday of each month.
Bitcoin prices surged on Thursday and into early Friday, with crypto enthusiasts bracing for a pivotal moment. Bitcoin is up 4% since yesterday but more volatility may be on the horizon.
Of the $8.1 billion in Bitcoin options expiring, about $4.9 billion is tied up in call options — contracts that give traders the right to buy Bitcoin at a specific price. The remaining $3.2 billion is held in put options, which give holders the right to sell at a predetermined price. Here's where it gets interesting — at current market prices, about 28% of call options and 9% of put options are in the money.
Around 55% of call options are at strike prices of $70,000 or higher, meaning that about $2.7 billion could expire worthless if Bitcoin settles below that level. On the other end, 69% of put options are set at $56,000 or lower, so about $2.2 billion could expire worthless. At current market prices, bulls stand to gain about $1 billion when the options contracts expire.
While this $8 billion options expiration is significant, it's not a record. The last monthly expiration before this year's Bitcoin halving in April saw $14 billion in options contracts.
Friday's expiry remains, however, the second-largest monthly event ever for Deribit, the largest cryptocurrency options exchange, accounting for $5.8 billion of the expiring contracts. Deribit's CEO estimated that as of Wednesday, about 20% of options were "in the money," with nearly 28% of call options and 9% of put options in that category.
This week traders are also keeping an eye on the release of the PCE report from the U.S. Bureau of Labor Statistics. The report, which tracks everyday goods prices, showed a 0.1% for the month, putting the 12-month inflation rate at 2.2%.
The recent rally in Bitcoin coincides with broader market trends after the Federal Reserve's decision last week to cut interest rates. The rate cut has spurred gains in not only Bitcoin but other cryptocurrencies and U.S. equities, as investors seem to be returning to riskier assets.