Max Pain—Largest Bitcoin Options Expiry in History to Conclude a Volatile Year

Max Pain: Largest Bitcoin Options Expiry in History to Conclude a Volatile Year

Bitcoin (BTC) has been moving wildly between the $92,500 to $94,000 range in recent hours, reaching $92,800 earlier today, ahead of the largest bitcoin options expiry in history. The event, scheduled for this Friday, will see $14 billion in bitcoin options open interest (OI) expire, marking a major turning point in the market as 2023 ends.

$14 Billion BTC Options Expiry Looms: A Game-Changer for 2024?

According to Luuk Strijers, CEO of Deribit, the world’s leading crypto options exchange, the put-call ratio for this expiry stands at 0.69, with seven puts for every 10 calls. This ratio signals a highly anticipated event, as December’s expiry dwarfs others, with 146,000 contracts outstanding. For comparison, the next largest expiry is set for March 2025 with only 73,000 contracts.

Strijers emphasized that this Friday’s expiry represents 44% of the total bitcoin options OI, which currently totals $32 billion. Moreover, more than $4 billion worth of these contracts are expected to expire in the money, which is likely to trigger significant trading activity across the market.

What Does This Mean for 2024?

While 2024 has been a bullish year for bitcoin, there is uncertainty surrounding the upcoming expiry. The volatility of volatility (vol-of-vol), reflected in the sharp fluctuations of Deribit’s DVOL index, underscores the precarious sentiment in the market.

"The much-anticipated annual expiry is poised to conclude a remarkable year for the bulls," said Strijers. However, he pointed out that directional uncertainty remains, driven by the volatility and positioning of market players. The bullish momentum that once dominated has stalled, leaving the market highly leveraged to the upside.

This creates a risk of a snowball effect if a significant downside move occurs after the expiry. As a result, all eyes are on this historic event, as it has the potential to shape the narrative heading into 2024.

Implications for the Future

The $14 billion expiry is not just a pivotal moment for the end of 2023—it provides critical insight into market positioning and sentiment as we transition into 2024. This event may serve as a precursor for future trends and will likely influence how traders approach the market in the months to come.

As the expiry approaches, market participants are bracing for potential volatility, with the results of this large-scale event set to echo throughout the cryptocurrency landscape well into the new year.