How Friday's $10.5B Bitcoin Options Expiration Could Signal Bear Market's End
A massive $10.5 billion Bitcoin monthly options expiration looms this Friday. An analysis of the data reveals which side holds the upper hand—bulls or bears?
Essential points:
- For Bitcoin bulls to gain an edge in Friday's $10.5 billion options expiration, a 9% price increase from present levels is necessary.
- A striking 90% correlation exists between Bitcoin and the Nasdaq 100 Index, demonstrating that technology sector investor sentiment is the key driver of market confidence.
On Wednesday, Bitcoin (BTC) price climbed to its highest point in eight days, completing a double bottom pattern around the $62,500 price zone. However, even with this recent upward movement, Bitcoin price still sits 21% below where it traded one month earlier, indicating that bullish traders are not likely to emerge victorious during Friday's massive $10.5 billion monthly BTC options expiration. The question of whether bulls can reverse the situation at the eleventh hour and reclaim momentum in their favor continues to be uncertain.
The Deribit exchange maintains its commanding position with a 76% share of the market, comprising $4.5 billion in call (buy) options alongside $3.4 billion in put (sell) instruments. The OKX platform holds second position with $610 million allocated to calls and $385 million to puts, capturing 10% of the overall total. Completing the top three exchanges is CME with $255 million in call options and $287 million in put options, representing a 5% share of the market.
Bears hold advantage despite put options showing lower open interest figures
On the surface, the combined put options open interest seems to be 25% smaller compared to the equivalent call options. Yet, a closer examination shows that neutral-to-bullish trading strategies were surprised by Bitcoin's sudden drop beneath $75,000 during early February. If Bitcoin price stays under $70,000 when Friday arrives, 88% of the call options listed on Deribit will become worthless at expiration.
Even after removing calls with strike prices of $105,000 or higher, which usually represent components of sophisticated multi-leg strategies featuring reduced acquisition costs, merely 37% of the leftover positions are set below $75,000. In practical terms, this places the actual call options open interest on Deribit at approximately $780 million. Under these present market circumstances, examining whether bearish market participants have potentially overextended themselves becomes worthwhile.
On Deribit, $1.44 billion worth of put options open interest is directed at Bitcoin prices beneath $60,000, though positions set at $40,000 and $45,000 probably weren't truly aiming for those particular price levels. Extreme price targets typically correlate with calendar strategies and ratio spreads, since these approaches can generate profits without requiring a dramatic price collapse.
On Deribit, put options positioned at $72,000 or higher account for $1.15 billion in open interest, representing sufficient volume to counter the existing call options. While Bitcoin's movement toward $60,000 probably wasn't connected to macroeconomic factors, the importance of Nvidia's (NVDA US) earnings report scheduled for release after Wednesday's US market close should not be minimized.
The performance of the artificial intelligence industry, especially the viable operating profit margins of the planet's largest corporations, continues to play a critical role for all risk-based markets. Historical patterns indicate that Bitcoin's connection with equity markets rarely persists for extended periods, yet the outcome of Friday's $10.5 billion options expiration might be determined by how stock markets perform.
The existing 90% correlation between Bitcoin and the Nasdaq 100 Index provides unmistakable proof that technology sector performance serves as the primary catalyst for trader confidence, yet as long as Bitcoin price continues trading beneath $75,000, the upper hand remains with put options holders.
Here are three likely scenarios for Friday's BTC options expiration at Deribit considering current price action:
- Between $65,000 and $69,000: The net result favors the put (sell) instruments by $1.15 billion.
- Between $69,001 and $71,000: The net result favors the put (sell) instruments by $845 million.
- Between $71,001 and $74,000: The net result favors the put (sell) instruments by $470 million.
In the final analysis, Bitcoin bulls require a 9% price rally from the current $68,800 level to turn the tables on the February options expiration outcome.