More volatility and price declines might be in store for cryptocurrencies as $5 billion worth of Bitcoin (BTC) options contracts are set to expire this coming Friday (Feb. 28).
Bitcoin’s downward trend in recent weeks could continue as traders offload billions worth of options contracts heading into month’s end. The price of Bitcoin remains below the key support level of $90,000 after a steep selloff in recent days. Other crypto, such as Ethereum (ETH), have also sold off sharply.
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 crypto. 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.
Out-of-the-Money Calls
According to data from Deribit, out of the $5 billion of options due to expire on Feb. 28, $3.9 billion (78%) is likely to expire out-the-money, meaning those contracts will expire worthless. Most 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 in recent weeks.
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 or lower. In the past month, the price of BTC has fallen 17% to trade at $86,800.
Is BTC a Buy?
Most Wall Street firms don’t offer ratings or price targets on Bitcoin, so we’ll look at the cryptocurrency’s three-month performance instead. As one can see in the chart below, the price of BTC has declined 8.03% in the last 12 weeks.
