KEY POINTS

  • New wave of volatility is expected as Bitcoin options worth $745 million will expire on Friday
  • Analysts monitor options prices and how it affects spot market prices
  • Bitcoin did not have a noticeable movement when $1 billion worth of BTC options expired last June 26

With Bitcoin options contracts set to expire Friday, July 31, BTC price is expected to experience another wave of volatility often associated with the end-of-month expiration of derivatives contracts.

Data aggregator Skew says 67,700 BTC options contracts worth $745 million will expire Friday. Options allow traders to bet on Bitcoin’s future price and they pay a premium for this right to buy or sell at that future date. Analysts and traders often monitor options prices and relate to BTC’s prices in the spot market.

Analysts think that with current higher BTC prices, the impact of options could move the Bitcoin in either direction. Speaking with news outlet Decrypt, Nicholas Pelecanos of NEM Venture Fund said open interest for BTC options is at its highest, although he does not see a large downward price soon. “There is potential for some options related moves around the expiry but can’t see any big bear move on the cards,” he told the publication.

He added that a maturing options market will be beneficial to Bitcoin and will reduce price volatility. Reduction of price volatility, Bloomberg said, will be a sign that Bitcoin is maturing as a mainstream asset class.

End-of-months for Bitcoin is usually dominated by news regarding expiring options and futures prices. Last month, $1 billion worth of Bitcoins was set to expire on June 26 but volatility at that time could not be compared to this week when Bitcoin plowed past $11,000 for the first time in a year. Currently trading at $11,008, there are some analysts who are confident that Bitcoin won’t be affected too much this time around.

“It’s very difficult to anticipate,” said Mati Greenspan of Quantum Economics. He told Decrypt that while there were instances where large options contracts expired and Bitcoin’s price moved, there were also times when Bitcoin did not move at all, just like last June 26.

After July 31, there are 37.9 BTC options contracts set to expire on Aug. 28 and 34.6 BTC on Sept. 25, Skew.com reported.

Bitcoin is the best known virtual currency, but it may face a real problem next week Bitcoin is the best known virtual currency, but it may face a real problem next week Photo: AFP / INA FASSBENDER