Bitcoin price under pressure as $5b options expiry looms

Deribit’s volatility index fluctuated between 48 and 52, signaling bitcoin investor uncertainty following recent cryptocurrency market declines.

Cryptocurrency prices fell further on Feb. 26, ahead of a significant options expiration later this week. Bitcoin (BTC) options with a notional value of approximately $5 billion will expire this Friday on Deribit, likely contributing to increased market volatility.

Options allow traders to buy or sell an asset at a predetermined price within a set timeframe, though they are not obligated to do so.

The recent bitcoin and cryptocurrency market downturn has resulted in substantial unrealized losses for options investors. According to Deribit, 78% of expiring bitcoin options, worth an estimated $3.9 billion, could expire out of the money, as most positions were set at higher price levels.

However, options holders may attempt to influence the market to mitigate losses, according to PowerTrade, a cryptocurrency options exchange. PowerTrade noted that bitcoin’s max pain level sat at $98,000, $13,000 above its price at press time.

Max pain refers to the price at which options sellers extract the most profit, while buyers experience the most significant losses.

PowerTrade suggested that this price discrepancy could incentivize market participants to keep bitcoin near this level, stating in a post on X.

However, open interest traders could face an uphill battle due to extreme fear in the crypto markets. Spot BTC exchange-traded funds experienced over $1 billion in outflows, one of the largest single-day exits to date. 

Meanwhile, data from IntoTheBlock shows that users deposited $1.3 billion worth of bitcoin onto cryptocurrency exchanges, increasing selling pressure and market uncertainty. Bitcoin declined over 4% on the day, trading around $85,500 amid a broader market selloff.