Bitcoin bulls are waiting ahead of a huge batch of Bitcoin options headed toward expiry.
Roughly $15 billion in options contracts are set to expire on Friday in the market’s quarterly settlement.
The September 25 contracts account for more than a third of all bitcoin options open interest on crypto derivatives platform Deribit.
A call option gives the trader the right, but not the obligation, to buy the underlying asset at a set price on a future date. A put option gives the right to sell.
And traders appear to be leaning bullish heading into Friday.
The put-to-call ratio, a closely watched gauge comparing bets to sell against bets to buy, sits at 0.70. That means more traders are positioned for prices to rise.
The biggest piles of call options are stacked at strike prices of $85,000, $90,000, and $100,000.
Bitcoin’s price was recently trading at around $84,258, down 2% over the past day — and well above the so-called max pain level of $76,000.
Max pain is the price at which the largest number of options contracts would expire worthless, causing the most losses for option holders.
Bitcoin sits just below $85,000, where call options are most heavily concentrated, and traders are watching whether that level caps prices ahead of Friday’s expiry.
When a large batch of options nears expiry, crypto markets can become more volatile as traders decide whether to close their positions, roll them into later contracts, or let them lapse.
Past expiries have sometimes been followed by sharp price moves in either direction.
But that isn’t a given. Market makers hedging their books can dampen price swings in the run-up to settlement, sometimes keeping prices close to heavily traded strike levels.
In the past, when large amounts of options have expired, the market has crashed. Though this isn’t a given as market makers can sometimes suppress volatility by selling option premiums.
Investors have a renewed interest in Bitcoin after the artificial intelligence stock rally cooled and the U.S. Department of the Treasury in August said it would at least double the size of its liquidity-support buyback operations.
Analysts said the move pushed 30-year Treasury yields down, weakened the dollar, and made assets like bitcoin more attractive. Following the announcement, the bitcoin price had its best run in years.
A Tuesday report from crypto market data firm CryptoQuant said that the leading cryptocurrency crossed above its 365-day moving average, a signal that the asset has finished being in a bear market.