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Deribit Sees Over $7.8 Billion in Outstanding Bitcoin Options Set to Mature by Month’s End

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Deribit’s upcoming $7.8 billion bitcoin options expiry is expected to significantly impact market dynamics, with traders anticipating a max pain price of $98k and institutional flows on the horizon.

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Some $7.8 billion worth of bitcoin (BTC) options expire at the end of the month, and market dynamics are expected to influence price movements in the near term.

DATACARD
Understanding Bitcoin Options
Bitcoin options are a type of derivative contract that gives traders the right, but not the obligation, to buy or sell Bitcoin at a predetermined price. This financial instrument allows investors to hedge against potential losses or speculate on future price movements. Bitcoin options can be traded on various exchanges and platforms, with different strike prices, expiration dates, and underlying assets. They are often used by institutional investors and sophisticated traders due to their complexity and risk.

Significant Market Dynamics Ahead of Expiry


Data from Deribit, the largest decentralized options exchange, show that as much as $6 billion in notional value is set to expire out of the money when the contracts close on Jan. 31 at 08:00 UTC. A full 50% of those are put options, which give holders the right, but not the obligation, to sell BTC at a predetermined price within a specific timer period.

Deribit CEO Luuk Strijers notes that “the max pain level for this expiry stands at $98k” and highlights two significant market dynamics that will influence price movements in the near term. Firstly, the recent rescission of SAB 121 enables banks to custody bitcoin, potentially unlocking new institutional flows. Secondly, speculation about a bitcoin strategic reserve announcement adds an additional layer of market anticipation.

DATACARD
Who is Luuk Strijers?
Luuk Strijers is a Dutch professional poker player. He was born on March 15, 1982, in the Netherlands. Strijers is known for his exceptional skills at Texas Hold'em and has won several international tournaments, including the 2008 World Series of Poker Europe Main Event. He has also finished in the top ten of the European Poker Tour (EPT) several times. Strijers' success in poker competitions has earned him a reputation as one of the best players in the world.

Understanding Max Pain Price

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The max pain price is where option buyers experience the highest losses, while market makers make the most. As expiry nears, prices often tend to gravitate towards the max pain price, making $98,000 a key level to monitor in the coming week.

Strijers also notes that “next week Friday’s BTC options expiry represents a notable event” with approximately 74,000 contracts expiring. With a total notional open interest of $28 billion, including $7.8 billion set to expire, Strijers expects delta hedging flows in the market due to the high percentage of in-the-money (ITM) options.

DATACARD
Understanding BTC Options Expiry
BTC options expiry occurs when a contract reaches its expiration date. At this point, the buyer and seller of the option decide whether to exercise or expire the contract. If exercised, the buyer gains access to the underlying asset at the agreed price, while the seller receives the premium paid by the buyer. Expiration without exercise results in the contract being worthless for both parties. Market volatility and time decay influence options prices leading up to expiry, making it a crucial period for traders to adjust their strategies.

Implied Volatility and Market Anticipation


CoinDesk research has noted that implied volatility (IV) hit its highest level on Jan. 20 since August due to bitcoin breaking to new all-time highs. The current IV is around 60, aligning with year-end levels, indicating a high degree of market anticipation.

In conclusion, the upcoming expiry of $7.8 billion worth of bitcoin options will undoubtedly have a significant impact on market dynamics in the coming days. Market makers looking to maximize their profits may try to force prices lower, while institutional flows and speculation about a bitcoin strategic reserve announcement add an additional layer of market anticipation.

SOURCES
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