Bitcoin headed for Christmas volatility as 100K BTC options expire

Roughly $2.3 billion worth of Bitcoin futures is set to expire on Christmas day, setting the stage for a volatile week in the cryptocurrency market. 

In a Monday tweet, crypto data provider Skew reported that 102,200 Bitcoin (BTC) options will expire on Friday.

Options contracts allow holders to buy or sell Bitcoin at a specific price, which is known as the strike price. The Friday expiry has notable clusters around the $15,000 strike price and the $20,000 strike price, according to Skew.

The expiry date of Bitcoin options contracts is widely regarded as a volatile event for the flagship cryptocurrency because, as the expiry nears, holders adjust their contracts. Traders who are in profit may also decide to receive the payout and dump the cryptocurrency.

Such events have been known to cause large fluctuations in Bitcoin’s value. Typically, the impact of a contract on BTC price becomes more apparent roughly one or two days before expiry. 

Crypto derivatives trading has soared this year as more traders and institutional investors look for added Bitcoin exposure. Last week, crypto derivatives platform Deribit began offering Bitcoin futures with a $100,000 strike price expiring on Sept. 24, 2021. In other words, Bitcoin enthusiasts who think the cryptocurrency will reach a six-figure moonshot can now take that bet in the futures market.

Bitcoin is currently in the midst of a bull market that’s being fueled in part by institutional investors and large over-the-counter trades. Even with the anticipated futures volatility, there’s a good chance that Bitcoin will remain well supported by institutional demand and the rise of so-called illiquid wallets — i.e., addresses that have sent less than 25% of the BTC they’ve ever received. Chainanalysis believes illiquid wallets hold 77% of the 14.8 million mined BTC that hasn't been lost.