Watch Out: $7.8 Billion in Bitcoin Options Expire Later This Month – Here’s the Most Critical Price Level to Watch

Bitcoin (BTC) options worth approximately $7.8 billion will expire on January 31, increasing the likelihood of significant price volatility in the coming days.

With the largest cryptocurrency trading well above its “maximum loss” price, market makers may attempt to push prices lower to maximize their profits.

Data from Deribit, the world’s largest decentralized options exchange, reveals that $6 billion in expiring options contracts are expected to be settled “out of the money,” meaning they will be worth nothing at expiration. Notably, 50% of these contracts are put options, which give holders the right to sell BTC at a predetermined price.

“The maximum loss level for this expiration is $98,000 and important market dynamics are expected to influence price movements in the near term,” said Deribit CEO Luuk Strijers.

The “maximum loss” price is the level at which option buyers suffer the greatest losses and market makers see the greatest profits. Historically, prices tend to drift toward the maximum pain level as expiration approaches, making $98,000 a critical level to watch.

Strijers highlighted the impact of recent regulatory developments on market dynamics. “The repeal of SAB 121 now allows banks to store Bitcoin, potentially unlocking new institutional flows. Additionally, speculation around a potential Bitcoin strategic reserve announcement adds another layer to market anticipation,” he said.

The combination of these factors is expected to influence trading behavior as maturity approaches, with market participants closely monitoring potential delta hedging flows, a dynamic that could further increase volatility.

The upcoming expiration includes approximately 74,000 BTC options contracts representing a notional value of $7.8 billion. According to Deribit, 22.6% of these contracts are currently “in the money” (ITM), meaning they have intrinsic value and could trigger additional market movements.

Deribit’s Bitcoin Volatility Index (DVOL) is currently hovering around 60, consistent with year-end levels.

*This is not investment advice.