$3.7 billion in Bitcoin options will expire on January 29, and the price will fluctuate violently

According to Business Insider on January 18, as the recent volatility of cryptocurrency prices and people's growing interest in its derivatives have increased, speculative activity has increased, and a record $3.7 billion worth of Bitcoin options will expire on January 29.

On Monday morning, according to data from a cryptocurrency data analysis website, the value of open options contracts was approximately 245,700 bitcoins, or $9.1 billion (approximately RMB 59.1 billion).

Bitcoin options give investors the right, but not the obligation, to buy or sell cryptocurrencies at a specified price within a specified time. They give investors the opportunity to make money by betting on price movements without having to trade the digital currency itself.

Deribit, the exchange that currently trades the most bitcoin options, began offering these products in 2018. But interest has risen sharply in the past few months as the price of bitcoin surged toward an all-time high of $42,000 earlier this month.

On Monday morning, it was priced at around $37,000 (about 240,000 yuan).

Data shows that option contracts worth about 101,000 bitcoins, calculated at Monday's price, are worth $3.7 billion (about 24 billion yuan) and will expire on January 29. Blockchain media Cointelegraph pointed out that this figure exceeded the previous record of about $2.4 billion (about 15.6 billion yuan) set on December 25.

Options show speculators are bullish on bitcoin’s prospects. As of Monday, open interest in “calls” — bets that prices will rise — far outweighed “puts” — bets that prices will fall.

“It reflects how volatile bitcoin has become over the last few months, even by its own standards,” said Craig Erland, market analyst at Anda Currency. “The moves we’re seeing every day right now are incredible, so it’s natural that people would use options more.”

The price of Bitcoin has surged more than 300% over the past year and more than 60% over the past month.

Analysts say the main driving force behind the coronavirus pandemic has been the massive cash injections into the economy by central banks and governments, while concerns about inflation and currency depreciation are also a factor.

However, the price of Bitcoin fluctuates greatly, with daily fluctuations often exceeding 10%. After hitting a record high of more than $41,000 (about 266,000 yuan) on January 8, it fell to nearly $30,000 (about 195,000 yuan) a few days later, and then rose again.

The average daily trading volume of Cryptocurrencies traded on Germany's BTCetc Bitcoin exchange has exceeded 50 million euros (about 390 million yuan) this year. According to data from the German exchange, the Bitcoin Trust of digital currency asset management company Grayscale is also booming.

Options have also become an increasingly popular way to speculate on Bitcoin, and well-known institutions such as the Chicago Mercantile Exchange have also entered the market, which has promoted the development of the market.

“It shows how the field is maturing, but I would add that it still has an extremely long way to go in this regard,” Erland said. “The creation and adoption of these trading vehicles, such as options, is a step forward, but it still remains a highly speculative instrument.”

JPMorgan analysts said last week that bitcoin prices may need to break through the $40,000 mark again in the near term if they are to rise further. They warned that if they don’t recover soon, trend-following “momentum” funds could force prices down.

Original title: "Record-breaking $3.7 billion in Bitcoin options will expire on January 29, with sharp price fluctuations"

Source: Canada-US Finance