Bitcoin Volatility Imminent As Options Contract Set To Expire
It is no longer news that Bitcoin has been enduring what could best be described as a hard time in the crypto market. The digital asset has been seeing small jumps and heavy drops in the last few days, which has prompted analysts to say that the sell-off might already be here.
Even though most of them have mentioned that the sell-off night he around the corner, the on-chain analysis of Bitcoin is still showing that the asset might make another bill run soon. Despite that, new information being brought to light has shown that Bitcoin might begin to see volatility as the days roll by.
The contracts are set to expire by January 29
According to analysts and experts in the Bitcoin options markets, traders and investors in the leading digital need to start preparing their minds for a massive correction. In their analysis of several events, they have mentioned the Bitcoin options contracts that are about to expire at the end of the month as a major determining factor. Notably, Bitcoin options worth about 118,000 are set to expire on January 29, which could prove drastic for the digital asset price.
Bitcoin witnessed a massive price fall of about 13% last Thursday as the bears led the digital asset’s charge to bring it down towards the $28,800 price region. According to various analysts and experts, volatility has taken over the market. It would continue to reside till next week Friday, the day the $3.5 billion worth of Bitcoin options contract is scheduled to expire.
Notably, this recent Bitcoin options contract set to expire has been seen as the largest ever Bitcoin options contract that has been held and would expire. The volatility that is expected to rock the Bitcoin market is very high, as analysts have pointed out that it might probably take the shape of the March sell-off in the Bitcoin market last year.
Analysts say volatility would be similar to that of March sell-off
Bitcoin had to endure volatility amid the coronavirus pandemic in the early part of 2020 as traders started panic sales. This action saw the price of the digital asset move from around $7,000 to $3,500, losing about 50% to showcase the full presence of the bears in the market. This lastest level of volatility also means that premiums in the options contract are now very expensive.
According to a famous firm that carries out Bitcoin options, most of the traders on its platform have sent input orders, which has put the price of Bitcoin between $31,000 and $28,000, expiring January 29. This shows that traders are trying to mitigate their losses and take whatever they can before they run into bigger losses.
Also, traders sent in call options, with most of them earmarking the price of the asset at $72,000. Experts have also mentioned that the call traders are trying to use it to hedge against short exposure that might happen in the coming days. This also means that long term traders are now showing interest after liquidating all their spot trading funds.