Noting the upcoming expiration of $750 million in Bitcoin options, which is likely to happen towards the end of this month, happens as a coincidence with two important dates.
It is anticipated that the Bitcoin volatility spike might happen at the end of the month as significant two factors come into play. There is a substantial $750 million that is about to expire. There is also a hike in the CME futures market interests.
Usually, as the futures near expiration, the holders of the options tend to change their contracts before or soon after expiration. Most of the time that will bring volatility in the price of bitcoins.
Noting that it is nearing the end of the month, options are almost expiring and the CME expiration all coinciding with it wouldn’t be easy to weigh how volatile the Bitcoin options will be until it is two days before expiration. The expiration about to happen will take place on the last Friday of the contract month which coincides with other crucial dates.
Looking at the CME Bitcoin calendar, the October futures will expire on the 30th of the month since all the Bitcoin futures expiration comes the last Friday of the month. The expiry of CME Bitcoin futures about to happen is essential since it boasts high open interest. Reports indicate that CME Bitcoin has become the largest bitcoin futures market by open interest to the extent of overtaking Binance futures and other main exchanges.
Noting that CME leads accredited investors and institutions, it boasts varying significance when the CME Bitcoin futures market surpasses the main cryptocurrencies. Importantly, it indicates that the need to buy Bitcoin from the institution is getting to levels it hadn’t gotten to earlier. CME has an open interest which is the cumulative amount of long and short contracts open in the market. Therefore, if open interest is moving towards the expiration date, it is likely to lead to high volatility.
The Effect of Expiration on Bitcoin Price
The expiration of the options and futures is highly anticipated, and Bitcoin looks ahead for more toward the end of the month. Upon expiration on 26th October 2018, Bitcoin for the first time hit a $13000 threshold from the start of the year. If Bitcoin can maintain the $13000 mark next month, it would mean a candle close of above $13000 for almost three years. Also, researchers are noting the ongoing Bitcoin trend, which might not end soon. The Bitcoin options pricing has chances of hiking in the next two months.
The question is whether it will be able to maintain the momentum or not. However, with the anticipated rise in volatility, it is likely to help bitcoin attain a sharp rejection or else help it maintain the momentum. Besides, if Bitcoin can maintain above the $13000 until the end of this month, it would increase the chances that it would be able to maintain the momentum after that.
Technical experts are challenging the current structure of Bitcoins. However, there is an upward trend in its price despite the challenges. The demand is still growing in the market. Nonetheless, the pressure to sell from miners, investors, and players is slowly getting offset by the emergence of new capital that is getting in the cryptocurrency market.
Looking at the past expiration on 25th September, the price of Bitcoins rose significantly over a short period of time. For this month, the volatility is likely to result from the expiration of the September options.
Noteworthy, the Bitcoin options are set to expire automatically once it is exercised in the expiring cash-settled futures which are capable of settling the CME Bitcoin reference rate. The expiration will take place at 4 p.m on the last Friday of every contract month. We will soon see the effect of expiration on bitcoin price when it happens.