Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
A record $31 billion worth of Bitcoin options are poised to expire on Halloween, marking the largest monthly expiry to date. This substantial event follows a volatile October that saw a flash crash liquidate $19 billion in leveraged positions, yet open interest on major derivatives exchanges has reached new highs, indicating continued institutional hedging and speculative bets on Bitcoin’s future price movements.
Record Expiry Details
The upcoming expiry significantly surpasses last month’s $18 billion. Approximately $14 billion in options contracts are set to expire on Deribit, a leading crypto derivatives exchange, while CME, the world’s largest derivatives exchange, accounts for another $13.5 billion.
Despite the recent market turbulence, Deribit’s Bitcoin options open interest has surged to an all-time high of $50.27 billion, representing 453,820 active contracts. This reflects more than a doubling of open interest year-to-date, suggesting increased institutional activity in hedging against potential market downturns.
Market Positioning and Volatility Concerns
Analysts observe a notable concentration of put contracts at a $100,000 strike price, totaling $2 billion in open interest. This indicates that some traders are betting on Bitcoin’s price falling to that level. Conversely, call options are clustering around the $120,000 mark, implying expectations of potential price rebounds or increased volatility.
Historically, large options expiries can suppress volatility in the lead-up but often result in a clearer directional price movement within 24 to 72 hours following the cut-off. The market remains highly leveraged, which could set the stage for further cascading liquidations if Bitcoin experiences a sudden price dip, as witnessed earlier in October.
Broader Market Context
Bitcoin’s price was trading around $109,866 on Friday morning, showing a modest 0.2% gain over the past day. Traders are currently processing the delayed Consumer Price Index report and are looking ahead to next week’s Federal Open Markets Committee meeting, with a 97% chance of a Fed rate cut anticipated by the CME FedWatch Tool.
Bitcoin ETF flows have shown mixed signals this month. After strong inflows of $2.7 billion in the first week, the second week saw $1.2 billion in outflows following the deleveraging event. However, Bitcoin funds have since attracted $356 million in net inflows this week, according to Farside Investors data.
Analyst Outlook
Bitfinex analysts suggest that the slow rebuild of open interest does not signal a loss of conviction among Bitcoin traders. They note that significant open interest liquidations, typically 20-40% of the total, often precede higher prices after the market flush. While a consolidation period is normal, analysts do not believe the current market represents the end of the bull trend.
The notional value of expiring options could still fluctuate before next Friday’s deadline. Traders are gradually rolling positions into November contracts, with 1-week and 1-month Put-Call skews remaining elevated, although repriced lower after a mid-month rally, as two Fed rate cuts by year-end are now fully priced in following softer-than-expected U.S. inflation data.
