About $3.3 billion worth of Bitcoin options expires today. Should traders cash out, they could dump a lot of Bitcoin on the market, potentially putting pressure on Bitcoin’s price. Should they HODL or reinvest, the crypto market’s rivers could gush with fresh money.
In addition to the Bitcoin investments, 400,000 ETH worth of Ethereum options contracts also expire today. That’s worth about $613 million.
Options contracts grant traders the right, but not the obligation, to buy some asset (in this case, Bitcoin) at a specified price at some point in the future. Bitcoin options are, essentially, another way to speculate on Bitcoin’s price.
You can trade these options contracts right up until they expire, and they become more valuable if it looks like they’re going to be correct. They differ from futures contracts, which force traders to buy Bitcoin at a certain price upon the expiry of the contracts.
Options and futures contracts come in various shapes and sizes and expiry dates. But the last Friday of the month is always a clean-cut and lots of contracts expire on this day each month.
So, what’s it all mean?
Denis Vinokourov, head of research at crypto prime broker Bequant, isn’t too fussed. “Options flows are not yet at the size where they can move the market”, he told.
More recently, Vinokourov has noticed that although the price dips when traders cash out their options, it subsequently goes back up. “It is worth noting that a lot of the flow is market neutral, as opposed to directional”, he added. In other words: less buying and selling, more HODLing.
There’s far more money in contracts that expire at the end of March, however; about 84,700 Bitcoin, per Skew Analytics, currently worth $4 billion. It’s the same story with Ethereum: 551,800 ETH expires on March 26, or $841 million.
That could be because the final Friday of March is close to the tax deadline, which in the US is April 15. Traders that profit from futures or options contracts must put that towards their tax bills; losers can write it off as losses.