Bitcoin futures valued at approximately $2.3 billion are set to expire on Christmas day, marking the week as a potentially volatile one for cryptocurrency.
Cryptocurrency data service Skew tweeted a report early this week that a whopping 102,200 Bitcoin are going to expire on the holiday, charting that this is the biggest year for the expiration of futures by a substantial portion:
💯 More than 100k BTC Options expiring on Dec 25th! pic.twitter.com/lnbACbJUjZ
— skew (@skewdotcom) December 21, 2020
Holders have the option to buy or sell at a specific price, known as a price strike, and the Friday expiry has clusters of around $15,000 and $20,000 attached to their price strike, according to the data collated by Skew.
Why this could be volatile for Bitcoin
Holders might adjust their contracts – with the possibilities of traders selling to take a profit. If there’s a massive sell-off, the boat will be swayed and might remain rocky for some time. The volatility around Bitcoin options contracts expiry dates is usually notable. This is especially true in this case, given the size of the clusters.
If the event is going to cause ripples in the price of Bitcoin – likely leading to price waves across the market – it will be come evident in the next two days, leading up to Christmas day.
Institutions and Bitcoin bets
Derivative trading in the cryptocurrency market has skyrocketed this year as a result of more retailers and more institutional investors are more interested in the cryptomarket. Deribit, a cryptocurrency derivatives trading platform, offered Bitcoin futures with a $100,000 price strike set to expire next year September.
If investors are bullish and think that Bitcoin will hit that figure within the next ten months, they can bet on the outcome in the futures market. Should this hit a massive investor interest, we’ll be looking at a possibility of volatility around the expiration event next year September too.
Bitcoin price and the current rally
As it stands, Bitcoin and the cryptocurrency market is in the midst of a bull run which is driven by several key factors. Important to note is the institutional investor buy-in, which has increased significantly over the past eight months. In addition to this, the Bitcoin halving in May would have spurred on a supply-demand shift; leading to a predicted price spike which seems to be coming to fruition. Even with the possible volatility set for 25th December with the futures expiration, it is possible that the price of Bitcoin will remain backed by the institutions and the current support levels will hold.