A huge amount worth about $4 billion of Bitcoin options contracts expired a few days ago, but it had an imperceptible effect on the prices of Bitcoin.
Expiration of Bitcoin Options Contracts Worth Almost $4 Billion
According to the data provided by Skew Analytics, a precise amount of $3.842 billion worth of BTC options contracts has expired recently. There were many predictions that following the expiration of these Bitcoin options contracts, there would be a huge downfall in the price of BTC, and investors showed a lot of concerns regarding this matter, but these predictions turned out to be nothing but a hoax because the price of BTC, instead of going down, has risen by a nearly 2%.
An options contract enables but does not obligate the buyer to buy the asset for which they had acquired the options contract, which was BTC in this case, in the future at a specified price. For example, if you sign up on an options contract to buy BTC at a price of $45k in a time period of 6 months, you have an option of acquiring Bitcoin at the specified price when the options contract matures. It is not necessary for you to buy Bitcoins at this price. You only buy it if you think that it costs you a lesser amount of money to buy BTC as compared to the market price. The time when you can buy the asset mentioned in the options contract is different for the American and European options contracts.
A bitcoin options contract is similar to any other options contract. They allow you to buy Bitcoin at a specific price after the options contract expires, and it is also another way of predicting the value of the BTC market.
What Happens If Investors Choose to Exercise Their Options Contracts
The expiry date of almost all the options contracts tends to be grouped together by the end of a month, which means that if a huge amount of traders chooses to exercise options contract redemptions, they might sell and then dump all of the BTC they have acquired in the market to get a profit.
This would drop the price of BTC temporarily, but it did not happen this month. On the contrary, it grew by 2%.