This Friday marks the expiration of approximately $14 billion in bitcoin options on Deribit, which is the largest single expiration event this year. Mauricio Di Bartolomeo, co-founder of Ledn, a lender that has facilitated over $10 billion in bitcoin-backed loans since its inception in 2018, believes that the most significant market movements have already transpired.
Di Bartolomeo noted, "Quarterly expirations, such as the one in September, are essentially a two-act play."
The initial act unfolded last week when options related to BlackRock's IBIT fund expired, which he claims is the largest expiration on record for the ETF. The options were heavily weighted towards call contracts, which become profitable if the price exceeds a specified level, with the maximum pain point—where the most contracts become worthless—hovering around $40 per share. Bitcoin's surge past $80,000 pushed a substantial number of these calls above their strike prices.
Dealers who sold these call options find themselves at a disadvantage as prices rise, and they mitigate their risk by purchasing the underlying asset. In the case of IBIT, this means acquiring shares of the fund, and to issue new shares of a spot bitcoin ETF, they must also buy bitcoin, which directly impacts the cryptocurrency's market.
As Friday approaches, the Deribit options book reflects this scenario. Di Bartolomeo highlights significant concentrations of call options at the $85,000 and $100,000 levels, indicating where this hedging mechanism may recur, with bitcoin already trading above the $85,000 mark.