This Friday, $1 billion in Bitcoin Options expires. In this post I will explain the panorama that this event promises.
Future contracts are one of the main instruments to invest in Bitcoins. Even if you’re not buying the crypto currency directly. However, this Friday is almost the end of another month. This means that Bitcoin options will expire, which is why today we’ll explain the importance of this event for the crypt world.
Future contracts are relevant. The market for these financial derivative products is much bigger than the direct purchase of cryptoactives on existing exchanges.
These are derivative financial instruments. That is, instruments whose purchase does not imply the direct acquisition of the asset on which they depend. In other words, the purchase of Bitcoin Contracts, does not imply in any case the direct purchase of a BTC.
The great advantage of future contracts is that they allow you to predict the fall in the price of an asset. And therefore make short investments on them. So, if you have a Bitcoin contract for $10,000, and the price of the Bitcoin falls below 5,000, this means that at the end of the day you’ll make money. And therefore, that the contract increased in value for you even if the BTC fell.
By investing in cryptosystems with future contracts
Options expire: Volatility?
There are 114,700 options contracts, worth over $1 billion, expiring on June 26 at the major futures exchanges.
This tends to coincide with a drop in the price of Bitcoin, in light of the expectations generated by the expiration of these financial products, with the price generally recovering shortly thereafter. However, on this occasion it is not very clear what will happen.
This imminent expiration brings together 70% of the positions of the derivative markets. It is expected to trigger an episode of price volatility. This, due to the trends observed in the Bitcoin derivatives market in recent weeks, could break this tendency for future contract expirations to generate price declines, and, for this occasion, lead to a rise.
Interest on Bitcoin options. Source: skew.com
One scenario promises to give the long-awaited BTC boost of over $10,000 this time around. In addition, open interest in the digital currency stands at $1.3 billion, double what it was just a couple of months ago, according to Bitcoin and Crypto Analytics provider Skew. Another positive sign for the cryptomoney market.