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Bitcoin is flying high on Thursday, topping the $65,000 mark for the first time since the start of August. However, markets are bracing for an $8 billion Bitcoin options expiry tomorrow that could trigger a bout of volatility, according to analysts.
This isn't an all-time high for Bitcoin options expiries by any stretch. The final monthly expiry ahead of this year's Bitcoin halving in April was $14 billion. But it's still the second-largest monthly expiry sitting on the books for Deribit, which accounts for $5.8 billion worth of the Bitcoin options expiring.
Approximately 20% of those contracts were "in the money" when Deribit CEO Luuk Strijers sent a note about it on Wednesday.
But the split isn't even. Just shy of 28% of call options—which grant the trader the option to buy Bitcoin at a set price—and 9% of the put options (which give traders the option to sell at a set price) were in the money.
Valentin Fournier, an analyst at BRN, said that at the current Bitcoin price, "The upcoming options expiry could secure a $1 billion profit for the bulls."
He added it's common that derivatives traders who do close in profit tend to roll over, which would mean a lot of that liquidity would flow back into Bitcoin and could create some positive momentum. That's good and bad news for Bitcoin traders, who will also be contending with the effects of a new personal consumption expenditures report from the U.S. Bureau of Labor Statistics tomorrow.
The PCE report, which is released monthly, tracks the price Americans pay for common goods like milk and a gallon of gas. Analysts are expecting the PCE to rise 0.1% on a monthly basis and 2.7% on an annual basis, according to FactSet’s consensus estimates.
Strijers, of Deribit, also noted it's possible the notional value changes before markets close on Friday, either because "traders close or roll over their positions." Traders can voluntarily close their positions ahead of the expiry or roll them forward—basically giving themselves more time to be right about the way they bet Bitcoin's price would move.
Edited by Andrew Hayward