coindesk.com
On Friday, bitcoin $BTC$71,039.44 options or derivative contracts worth billions will expire on crypto exchange Deribit. Traders might want to note that the dynamics of the expiry are such that $BTC's market price could be lifted toward a very specific point: $75,000.
Deribit, the world's largest crypto options exchange, will settle bitcoin options contracts worth $14.16 billion on Friday at 08:00 UTC. This means nearly 40% of all open interest – the dollar value of all active contracts on the exchange – ware set to expire in roughly 48 hours. On Deribit, one options contract represents one $BTC.
Options are contracts that let you bet on whether the price of an asset, such as $BTC, will go up or down. A call option is a bet that the price will go up, and a put option is a bet that it will go down. Traders buy options to try to profit from price swings, or write (short) options to earn income while taking on the risk that prices move in favor of the buyer.
Here's why the expiry matters
According to Deribit’s data, the ‘max pain’ price — the level where the most contracts would expire worthless (lottery tickets that don’t win) — sits right at $75,000.
As such, this level could act as a magnet, according to Deribit's Chief Commerical Officer Jean-David Péquignot.
"With Bitcoin currently trading near $71k, the $75k Max Pain price represents a gravitational pull. Historically, this encourages delta-hedging by market makers that can drive prices toward the strike where the most options expire worthless," Péquignot told CoinDesk.
Here's how it works. As per the max pain theory, option writers — typically large funds, institutions, or market makers with ample capital — control or influence the spot price toward the pain point to limit payouts to buyers and thereby inflict maximum damage on them. This happens through normal trading in the spot or futures markets, rather than as a guaranteed manipulation.
This mechanical buying and selling often pulls the spot price closer to the max pain level, which is $75,000 in bitcoin's case.
While max pain is well-known in traditional markets, its influence on crypto remains debated. Deribit, however, flags the level as a potential magnet. Adding to the intrigue, several analysts have identified $75,000 as key resistance, above which bitcoin could go into a full-bull mode.
Controlled expiry
Quarterly expiries typically spark massive position adjustments and hedging flows. Still, the impending expiry is likely unfold normally, without an outsized volatility surge.
That's evident from the decline in the implied volatility index.
"Over the last sessions, we have witnessed an implied volatility (IV) compression, with both $BTC and ETH DVOL dropping by ~6 points. This suggests the market is pricing in a controlled expiry rather than an immediate explosion in volatility," Péquignot said.
He added that the market data suggests that traders aren't chasing a breakout as geopolitical uncertainty in the form of Iran war lingers. He specifically pointed to call writing by institutions at higher strikes (levels above going spot price) as the evidence of measured bullish sentiment. Traders typically write overhead calls to collect premiums on top of their spot market holdings.
"The Put/Call ratio for Bitcoin options remains healthy (0.63), but the concentration of sell-side calls suggests a ceiling of institutional resistance as traders have been overwriting their positions to bank premium while waiting for the geopolitical clock to run out," he noted.
All in all, the big expiry with $75,000 acting as a magnet comes at an intriguing juncture: bitcoin has held up remarkably well through the Iran war turbulence, maintaining strength even as equities wobble and energy markets remain fickle.