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An unusually large expiration of bitcoin and ether options on Friday is likely to increase crypto volatility after bitcoin has spent a week hovering above $30,000. The cryptocurrency has spent the past 12 months below that mark.
A total of 158,774 June, Q2, and H1 bitcoin contracts worth $4.8 billion and 1.23 million ether options of $2.3 billion will expire on Panama-based Deribit exchange, which hosts over 85% of the global trading in these instruments. Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at a certain price within a specific amount of time.
Open Interest For Options Expiring on June 30
Deribit
Although large expirations are typical for June, the upcoming expiry is drawing attention because of the recent bitcoin rally and sizable activity around the $30,000 price, according to Luuk Strijers, chief commercial officer at Deribit. In June 2022, only about 90,000 bitcoin contracts expired at Deribit.
“It’s going to be quite exciting because there will be some pressure in either direction,” Strijers says. “If bitcoin goes up, it could be pushed up faster because market makers will be buying to offset their short positions, and if it goes down, which could happen of course, it will be going down faster because they will be selling.” Market makers in cryptocurrencies are large investors who provide liquidity to exchanges.
The maximum pain price—the price that would cause the most losses for the largest number of option holders at expiration—for bitcoin is $26,000 according to Deribit. It stands at $1,700 for ether. “People see this max pain level as a magnet for keeping the market at a lower level. And if the magnet is removed, which is going to happen this Friday, it could put push the market up,” explains Strijers.
The original cryptocurrency hit its highest level in a year last week, crossing above $31,013, after BlackRockBLK, the world’s largest asset manager, filed an application for a spot bitcoin exchange-traded fund. It is trading at $30,591, as of Friday afternoon in New York.
Ether, the second-largest cryptocurrency by market value, is trading at $1,856.
