Why today is an important day for bitcoin, 2 billion in expired contracts

Last Updated: 25 June 2022

More than $2 billion worth of options contracts on bitcoin expires today. Many of these options guessed that bitcoin would have a value of 60 thousand dollars (57 thousand euros) today. This is far too optimistic.

These options could give the bitcoin price a big blow, but strangely enough, the price actually rose before these contracts expired.

Bitcoin rises to $21,000

Over the past 24 hours, the bitcoin price has risen 4%. As a result, its value is dancing around 21 thousand dollars (20 thousand euros). With many options expiring on the last Friday of every month (today), the question is whether this price can hold.

Approximately 103,000 contracts on bitcoin, with a nominal value of 2.1 billion dollars, expire today.

What is a bitcoin option contract anyway?

You’ve probably seen it before, but what exactly is a bitcoin option contract? The buyer of a bitcoin option contract purchases the right, not the obligation, to buy (call option) or sell (put option) bitcoin at a predetermined price.

A call option is a bet on the price to rise, and a put option is the opposite. For example, do you feel that bitcoin could go boom in the coming period, but you won’t have the money to buy it for a few weeks? Then a call option can be a smart move. You can then stipulate that you can buy bitcoin at today’s price in a few weeks.

If the price is $60,000 per bitcoin in 4 weeks’ time, you can still buy bitcoin at today’s price value. Of course, you will pay a premium to enter into that contract. The difference between the price in 4 weeks and today’s price minus the premium is the profit you make on the option contract. So every last Friday of the month like today, millions of such contracts are executed.

$500 away from maximum pain

The maximum pain price for bitcoin is $20,500, with most traders being far too bullish and betting on prices above $60,000. Maximum pain price refers to the price at which the largest number of option holders will suffer a financial loss. So at the moment, the price is about 21 thousand dollars, 500 dollars more than the maximum pain price, so it will be an exciting day today.

The Put to Call ratio is 0.57, with calls of 66.013 and puts of 37.495.

Possible drop to $17,000

A look at the technical analysis shows that bitcoin has found resistance at the $21,500 level, and every time the price tried to break out of this, it failed. So the current value is literally make or break today.

At the time of writing, the price is at 21,000 dollars, and if it does not manage to rise by 500 dollars, but drops below the maximum pain price, then the price could fall hard. According to analysts, the expiring contracts could cause bitcoin to dip below 17 thousand dollars.

Author

  • Florian Feidenfelder is a technical analyst with many years trading experience in the stock exchange and crypto markets. He has broad experience in forex trading, coaching, and funds management.

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