Home / Markets / Cryptocurrency /  Bitcoin options worth $6bn expiring today: What does it mean for investors?

A record $6 billion worth of bitcoin options contracts are set to expire later today. Earlier, $4 billion in options contracts had expired in January. The action in the derivatives market is most likely to dictate the price trend in the cryptocurrency over the next few months.

An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset.

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Experts warn that in a bearish setup, prices of the world’s biggest cryptocurrency could fall towards the $44,000 level or even lower. However, in the event of no major fall, the digital asset outlook may turn bullish.

The influence of the options market on bitcoin’s spot market has increased over the past few months. We tell you what the expiry means for investors and how they can position themselves in the market.

Prices of bitcoin had cracked over 10% on Thursday but have recovered marginally today.

Even as bitcoin recovered to quote over the $53,000 level on Friday morning, traders are betting that it will plunge to a low of $44,000 by evening, when the options contracts are set to expire. The level is being referred to as “max pain" in the investing parlance.

“We are reaching a juncture that is referred to as “max pain" when a record $6 billion of options contracts are set to expire. We hope that on Friday too, bitcoin doesn't witness too much correction. We expect it to be sticking around $44,000-45,000 zone," said Sumit Gupta, CEO and co-founder, CoinDCX.

At this point, multiple things could happen because there’s a lot of money that gets settled on the expiry and there’s a new position that is taken. Depending upon where the position is, the bitcoin prices will keep on changing.

According to experts, at the expiry on Friday, we may not see major movement, but post expiry, there could be big movements or even a correction.

“Bitcoin may consolidate for a while as it had a great run from the $50,000 level. Prices may catch up again and rise in May. I do not see a major crash, but a slow downtrend in April. If it corrects around 30% from its all-time high of $61,000, it will be a good buying opportunity," said Siddharth Menon, co-founder and COO, WazirX.

The 2017 bull market had a median correction of around 40-50%, but this year, as there is a lot of institutional participation, so the median correction has come down to 30%. Whenever the price had seen 30% correction, it always saw a rebound. According to Menon, bitcoin is in a strong uptrend and every dip is a buying opportunity. “If the risk-reward is favorable, it can be a good opportunity to enter the crypto market for the beginners," he said.

For HODLers, to minimize the downward risk, Menon suggests that the best way is to keep some cash and in a disciplined manner buy the dips if prices correct from here.

HODL stands for “Hold on for Dear Life", which suggests that one is holding onto their cryptocurrencies despite the price dips.


Abhinav Kaul

Abhinav Kaul writes on cryptocurrencies and mutual funds at Mint. His previous stints include ETMarkets, Reuters Bangalore and Press Trust of India.
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