This Friday, December 12, a big event is happening in the crypto market: around 39,000 Bitcoin options contracts are expiring. These contracts are worth about $3.6 billion. This is a significant event, just like last week’s option expiry. However, last week’s event didn’t really affect Bitcoin’s actual price in the market, known as the “spot price.”
This week, the United States Federal Reserve lowered its interest rate by 0.25%. The Federal Reserve sets an important interest rate that influences other interest rates in the United States. It’s part of their plan to control the economy and inflation (Learn more about the Federal Reserve interest rate). Most people expected this lower rate, so the crypto market didn’t react to the news.
What Does Bitcoin Options Expiry Mean?
Bitcoin options expiry means that a lot of contracts for Bitcoin trading (called “options contracts”) are reaching their end date. These contracts allow traders to buy or sell Bitcoin at a specific price in the future. This gives them the ability to hedge (reduce risks) or bet on Bitcoin’s future price. When these contracts expire, traders decide whether to use them or let them expire without doing anything.
This week, the group of Bitcoin options contracts has a “put/call ratio” of 1.1. The put/call ratio compares the number of traders betting that Bitcoin’s price will go down (puts) to those betting it will go up (calls). A ratio of 1.1 means slightly more people are betting on the price dropping. The price where most traders will lose or break even if they don’t win is called “max pain,” which this week is $90,000, according to the crypto trading platform Coinglass.
Open Interest in Bitcoin Options
Open interest refers to the total number of contracts still waiting to be settled (Learn more about open interest). This week, open interest is highest for Bitcoin priced at $100,000. This means there are $2.7 billion worth of contracts at this price level waiting to be completed on a trading platform called Deribit. Deribit is a platform that specializes in trading Bitcoin and other cryptocurrency options (a type of financial tool).
Meanwhile, short sellers—traders betting that Bitcoin’s price will drop—have about $2 billion in contracts for Bitcoin prices ranging from $80,000 to $85,000. Across all cryptocurrency exchanges, open interest for Bitcoin options totals $54.6 billion.
Deribit also reports that most Bitcoin trading has been centered around the $90,000 price range. They observed, “The balance between call and put options shows that traders expect prices to stay stable and are waiting for a market-changing event.” In simpler terms, traders aren’t expecting big price movements yet but are ready if something happens to change the market direction.
Cryptocurrency trading platform Greeks Live shared a cautious outlook following the recent interest rate cut. They stated, “Calling this a new bull market (a market where prices rise) is too early.” They further explained that during the Christmas and end-of-year holiday season, trading activity tends to slow down. This makes the market less active, which could prevent big price increases for now.
What About Ethereum Options?
In addition to Bitcoin options, about 247,000 Ethereum options contracts are set to expire too. These contracts are worth $768 million. For Ethereum, the max pain price is $3,100, and its put/call ratio is 1.24, meaning more traders are betting on Ethereum’s price to drop after the expiry. Across all exchanges, the total open interest for Ethereum contracts is around $12 billion.
Deribit stated that Ethereum trading has become more balanced. However, a high concentration of call options (bets on the price increasing) shows that traders are ready to expect bigger price moves if the market becomes more active again.
Altogether, the value of the combined Bitcoin and Ethereum options expiring today adds up to about $4.3 billion.
What’s Happening in the Spot Market?
The spot market, where cryptocurrencies are bought and sold immediately instead of using contracts, has stayed mostly flat in recent hours (Learn more about spot markets). The total value of all cryptocurrencies reached $3.2 trillion, showing a slight increase.
Bitcoin’s price went above $93,000 briefly, but it faced resistance, meaning buyers found it hard to keep the price up. It dropped back to $92,000 during early trading in Asian markets on Friday.
Ether, the cryptocurrency for Ethereum, has stayed in a tight price range around $3,200 recently. Other cryptocurrencies (called “altcoins”) like Solana, Bitcoin Cash, and privacy-focused coins like Monero and Zcash saw small gains but didn’t make any significant moves.
Overall, the market appears steady, with no dramatic shifts, as traders and investors keep an eye on future news or events that could impact prices.