On Friday, a noteworthy expiration of around $14 billion in bitcoin options will occur on Deribit, marking a major event in the market for this year. Mauricio Di Bartolomeo, co-founder of the lending platform Ledn, which has issued more than $10 billion in bitcoin-backed loans since 2018, suggests that the most impactful market actions may have already occurred.
He described quarterly expirations as a "two-act play," with the first act taking place last week when options tied to BlackRock's IBIT fund expired. This event is notable for being the largest expiration on record for the ETF. A majority of these options were call contracts, which profit when bitcoin surpasses a certain price, with the maximum pain point settling around $40 per share. Bitcoin's recent spike over $80,000 resulted in many of these calls becoming profitable.
As bitcoin prices increase, dealers holding these call options face challenges, compelling them to buy the underlying asset to reduce their risk. This is particularly relevant for the IBIT fund, as acquiring new shares of a bitcoin ETF necessitates purchasing bitcoin, thus affecting its market value.
