Analysts are suggesting that the record $6 billion in options due to expire on Friday, March 26, could add increased short-term selling pressure and volatility to markets.
According to derivatives data platform Bybt, over $5.5 billion in options contracts due to expire today, and previous expirations have impacted spot markets.
Options are a little like futures in that the derivatives contracts give traders the right but not the obligation to sell or buy an asset for a predetermined price.
The last Friday of the month has been significant for Bitcoin prices as it has dropped an average of 2% in the week leading up to the last three months’ last Fridays, according to The Defiant. It added that the weeks following had averaged 12% gains.
Data from Bybt indicates that 90% of the open interest comes via the Deribit derivatives platform, and the “max pain” level is $40K. Open interest refers to the total number of outstanding derivative contracts that have not been settled. Max pain is the price at which option sellers will owe the least amount of money to option buyers.
“The max pain price is more than 10K below BTC’s current price, a sign there may be selling pressure until Friday.”
Co-founders of analytics platform Glassnode, Jan and Yann, added that price expectations for April are high:
Industry analyst and investor Ran Neuner expects market volatility and short squeeze, which is effectively a rapid increase in the price of BTC owing primarily to an excess of short selling rather than underlying fundamentals.
“$6bn of futures expire today and Bitcoin held its ground! The sellers weren’t able to break $50k and so the shorts are out of the money! Expecting the mother of short squeezes in the next 4 days! Im going all in! Expect massive alt pump.”
At the time of press, Bitcoin was changing hands for $52,900, according to Tradingview.com’s BTC/USD chart, which puts it flat over the past 24 hours. The asset dropped to support and an intraday low at $50,500, which held initiating a further move upwards.
Crypto asset markets have been correcting heavily for the past week, with losses accelerating on Thursday, Mar. 25. As trading in Europe and the U.S. commences, all eyes will be on the big options expiry and Bitcoin’s next move.