Bitcoin Braces for $5B Options Expiry Storm

Bitcoin's price is facing pressure as a significant options expiry event looms, with a notional value of approximately $5 billion set to expire on Deribit this Friday. The upcoming expiry has sparked uncertainty among investors, with Deribit's volatility index fluctuating between 48 and 52.

The recent downturn in the cryptocurrency market has resulted in substantial unrealized losses for options investors. According to Deribit, around 78% of expiring bitcoin options, worth an estimated $3.9 billion, are likely to expire out of the money, as most positions were set at higher price levels. However, options holders may attempt to influence the market to mitigate their losses, with bitcoin's max pain level sitting at $98,000, $13,000 above its current price.

Market participants may be incentivized to keep bitcoin near the max pain level to extract the most profit, while buyers experience significant losses. However, open interest traders could face an uphill battle due to extreme fear in the crypto markets. Spot BTC exchange-traded funds experienced over $1 billion in outflows, one of the largest single-day exits to date, indicating a lack of confidence in the market.

Adding to the selling pressure, data from IntoTheBlock shows that users deposited $1.3 billion worth of bitcoin onto cryptocurrency exchanges, reflecting heightened market anxiety as traders rushed to offload their positions. Bitcoin declined over 4% on the day, trading around $85,500 amid a broader market selloff.