Crypto Countdown: $15B Options Expiry Sparks Volatility Forecast

The impending quarterly expiry of bitcoin (BTC) and ether (ETH) options contracts worth billions of dollars could potentially lead to increased volatility and bullish price movements in the cryptocurrency market. On Friday, Deribit, a leading cryptocurrency options exchange, will settle contracts totaling $15.2 billion, with BTC options accounting for $9.5 billion and ETH options for the remaining amount. This expiration is significant, wiping out a substantial portion of both BTC and ETH's total notional open interest across various maturities. Notional open interest represents the dollar value of active contracts, with each contract on Deribit representing one BTC or one ETH. Luuk Strijers, the chief commercial officer at Deribit, highlighted that a significant number of options are set to expire in-the-money (ITM), potentially injecting upward pressure or volatility into the market. Specifically, BTC options worth around $3.9 billion are set to expire ITM at the current market rate of approximately $70,000, which is 41% of the total quarterly open interest. Additionally, David Brickell, head of international distribution at FRNT Financial, noted that dealer hedging activities, particularly around the $70,000 strike, could further exacerbate volatility. These observations suggest that the expiration of these options contracts could lead to dynamic price movements in the cryptocurrency market.