Bitcoin (BTC) Options Contracts Worth $5 Billion Expire This Week: Expect Volatility

Bitcoin's downward trend in recent weeks could continue as traders offload billions worth of options contracts heading into month's end.

output: A large wave of Bitcoin (BTC) options contracts, collectively worth a staggering $5 billion, are due to expire this coming Friday, February 28, marking a potential turning point for the cryptocurrency market.

As traders prepare to close out their positions, billions of dollars in options are set to be offloaded, potentially adding to the volatility and price declines that have already been unfolding in recent weeks.

Bitcoin’s downward trend could continue as traders liquidate their options holdings. The price of Bitcoin remains below the key support level of $90,000 after a steep selloff in recent days, while other crypto, such as Ethereum (ETH), have also sold off sharply.

Analysts attribute the decline to investors becoming more risk averse amid signs that the U.S. economy is slowing down, with less jobs growth and a widening trade deficit.

Now, the expiry of options contracts threatens to add to the volatility and price declines among crypto. An options contract grants the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price within a set period of time.

According to data from Deribit, out of the $5 billion of options due to expire on February 28, $3.9 billion (78%) is likely to expire out-the-money.

Out-of-the-Money Calls

According to data from Deribit, out of the $5 billion of options due to expire on Feb. 28, $3.9 billion (78%) is likely to expire out-the-money, meaning those contracts will expire worthless.

Most of the options contracts that are set to expire were bullish calls that bet on Bitcoin's price rising in the near-term, leaving investors with significant unrealized losses.

Many analysts see further declines ahead for cryptocurrencies and Bitcoin in particular. Some analysts are now forecasting that Bitcoin's price will fall to $80,000 or lower.

In the past month, the price of BTC has declined 17% to trade at $86,800. Most Wall Street firms don't offer ratings or price targets on Bitcoin, so we'll look at the cryptocurrency's three-month performance instead. As one can see in the chart below, the price of BTC has declined 8.03% in the last 12 weeks.