The volatile nature of the digital currency market is one of its most defining features, and today will be no different as 2.5 billion worth of Bitcoin options expire on CBOE futures contracts that were traded yesterday in a bid to speculate about Bitcoin’s price trajectory over the next year.
Bitcoin options contracts that expire today are a big day for traders, but not yet the biggest. That will come next week when an estimated $50 billion worth of bitcoin expires at once. The market’s volatility is already on the rise as investors know this event nears…
The “what happens when bitcoin options expire” is a question that has been asked for quite some time. When the expiration date of an option comes, what does happen? Is there a spike in volatility or not? The answer to this question is no. There are no spikes in volatility.
Today, $2.5 billion of Bitcoin options are set to expire, as the market continues to fall.
Overview of Bitcoin
Bitcoin is now trading at $54K, down 7% for the day. The top cryptocurrency has seen tremendous volatility in the last 24 hours, dipping to $53K from a high of $59K, a loss of about $6,000.
Bitcoin, on the other hand, has not done well in the last seven days. On November 20th, the coin was worth around $58k, and it has since lost 5% of its value. Furthermore, a monthly chart shows that the BTC has lost 8% of its value. Despite the fact that Bitcoin reached an all-time high on November 10th, it is presently down 20%.
While the volatility may seem to be considerable at first glance, it is not. According to on-chain market statistics, Bitcoin’s volatility during the last 90 days has been quite low compared to past periods with more volatility.
How Might Option Expiration Affect the Market?
The expiration of 2.5 billion worth of Bitcoin options today may have an impact on coin volatility. While the expiration would have no direct effect on the coin’s price, it would have a significant impact on the market’s overall volatility. When they predict a surge in volatility, most professional traders carry Bitcoin options to hedge their holdings. According to the open interest, the maximum price was set at $58,000.
The spot Bitcoin trading pair is frequently followed by perpetual futures or derivatives such as options traded on multiple major platforms. As a result, the selling pressure on the spot market exceeds the power of derivatives.
Now, if market volatility increases, Bitcoin will experience greater highs and lower lows. While an upward trend might lead the coin to $70,000, a correction could result in a drop to $45,000.
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The “bitcoin options skew” is a phenomenon that has been present for a while. The volatility in the market’s price has increased as $2.5 billion worth of bitcoin options expire today.
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