More volatility and price declines might be in store for cryptocurrencies as $5 billion U.S. worth of Bitcoin (BTC) options contracts are set to expire on Feb. 28.
Bitcoin’s downward trend in recent weeks could continue as traders offload billions worth of options contracts heading into month’s end this coming Friday.
The price of Bitcoin remains below the key support level of $90,000 U.S. after a sharp selloff in recent days. Other crypto, such as Ethereum (ETH), have also sold off.
Analysts say the decline is due to investors growing more risk averse amid signs that the U.S. economy is slowing down.
Now, the expiry of options contracts threatens to add to the volatility and price declines among cryptocurrencies.
An options contract allows the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price within a set period of time.
According to data from Deribit, out of the $5 billion U.S. of options due to expire, $3.9 billion U.S. (78%) is likely to expire out-the-money (OTM), meaning those contracts will expire worthless.
Nearly 100% of the options contracts set to expire were bullish calls that bet on Bitcoin’s price rising in the near-term, leaving investors with significant unrealized losses as the price of BTC has declined during February.
Many analysts see further declines ahead for cryptocurrencies and Bitcoin in particular. Some analysts are now forecasting that Bitcoin’s price will fall to $80,000 U.S. or lower.
In the past month, Bitcoin’s price has fallen 17% to currently trade at $87,800 U.S.
