Bitcoin’s $18b options expiry is a volatility trap: Bitfinex analysts

Analysts at Bitfinex warn about a record $18 billion worth of Bitcoin options expiring this week.

Bitcoin is staring down a record-setting $18 billion options expiry, which will likely suppress volatility. According to analysts at Bitfinex, a concentration of calls between $115,000 and $125,000 has created a high-gamma environment. This effectively pins the BTC price in a very narrow range, the analysts told crypto.news on Friday, September 26.

“An $18 billion notional weekly expiry is record-setting and generates very high gamma concentrations in the same strike range where spot currently trades,” said Bitfinex analysts. As expiry nears, dealers hedge delta dynamically, which can ‘pin’ the price near the strikes with the largest open interest and suppress realised volatility.

Bitcoin to see lower volatility this week

This week’s expiry is the largest ever in dollar terms, which will likely have a major effect on price movement. What is more, the fact that options are clustered around where Bitcoin (BTC) is trading will likely create a “pinning” effect, reducing volatility.

“Historical precedent suggests that large expiries often suppress volatility leading into the cut-off, then result in a clearer directional move in the 24–72 hours that follow,” said Bitfinex analysts. “In the near term, we expect muted, range-bound trading with heightened gamma sensitivity. Watch the $115.2k pivot and the $120k cluster as key inflection points.”

In any case, whether Bitcoin breaks out or breaks down will likely depend on the options market. This means that traders waiting for a breakout may need to wait until after expiry, due to structural factors in the market. However, once these positions roll off, natural price discovery can resume.