KEY POINTS

  • The largest batch of Bitcoin options is set to expire June 26
  • Both options and futures, which are called derivatives, are reaching a new all-time high on the Chicago Mercantile Exchange (CME)
  • The presence of institutional investors on CME is bullish for Bitcoin in the long run

On Friday (June 26), $1 billion worth of Bitcoin options will expire. Yet, analysts do not think the spot prices will move dramatically in the short-term despite this being the largest batch of options to expire.

In Bitcoin Options trading, an investor pays for the right to buy or sell a particular amount of Bitcoins at a specified date. The investor pays a premium for this right (but not obligation) to buy or sell at a future date. Options allow investors and traders to bet on the future price of Bitcoin. In a call option, the trader has the right (again, not obligation) to buy. In a put option, the trader has the right to sell. Analysts, pundits, and spot traders are monitoring the options market to predict the future price of Bitcoin in the spot market. 

Around 114,000 options contracts are expiring June 26 across exchanges like Deribit, Bakkt, CME, and OKEx. Data from Skew Analytics suggested majority of the expiration will happen on Deribit exchange, an up and coming derivatives exchange. CME is also the site of large volumes of expiration suggesting the presence of institutional investors. Speaking with news outlet Decrypt, NEM Ventures Fund’s Nicholas Pelecanos said the large volume on CME is a good sign because it means institutions are looking at Bitcoin.

“What is interesting to note is the size and location of the flow, and the fact that a lot of the volume is on CME means it's likely large institutions. Long term, more institutional interest should equate a higher spot price,” Pelecanos added.

Bitcoin is currently trading at $9,234 in the spot markets with the RSI about to touch overbought levels. 

Some traders, Coindesk said, could have bought futures contracts, and also buy on the spot market to minimize losses. June 26 also marks the last trading day of many BTC futures, either weekly or monthly, totaling around $665 million. Both options and futures, which are called derivatives, are reaching a new all-time high on CME, suggesting increased confidence in the derivatives products as well as to the price of Bitcoin in the future.

In the past, the expiration of derivatives coincided with extreme volatility for the price of BTC. The pandemic has changed this and Bitcoin is now closely correlated with the stock market and affected by macro influences. 

According to Marcel Pechman of Cointelegraph, it will be difficult to estimate net exposure of professional traders toward expiry, but all indicators are bullish for Bitcoin. “It is safe to assume that most professional traders are positioning themselves for a neutral to positive price action over the next couple of days,” he added.

Bitcoin-Initiative Q A smartphone displays the Bitcoin USD market value on the stock exchange via the Yahoo Finance app. Photo: Guillaume Payen/SOPA Images/LightRocket via Getty Images