A Full Analysis Option expiration for Bitcoin at an unbelievable $19.8 billion is going to occur on December 27. Traders and analysts are glued to this phenomenon. This financial event could have a great impact on the trajectory of Bitcoin (BTC) prices, giving direction to price avenues concerning the wider cryptocurrency spectrum. Now more than ever, with Bitcoin breaking the $100,000 mark, the implication is that bulls and bears are gearing up for the final showdown.

What Are Bitcoin Options?

Options are financial derivatives that give investors the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe. Hedges within the financial bubble are, in the case of Bitcoin, options based on the speculation of price movement and hedging of risk-prevention. The two main classes of oven are those based on: a contraction (rise); and a put; simply to bet the price would drop.

When a large options expiry converges, it creates a moment of intense volatility. The options may expire either in cash, in which case they would become profitable, or out of cash, where they would be worthless. Both scenarios have a very strong effect on market sentiment as well as liquidity.

Why Is This Expiry Important?

Of all expiries known to have occurred in the crypto market, the one that will occur on December 27 stands out with contracts worth $19.8 billion. The other thing that makes this expiry important is that it is happening when Bitcoin touches its new peaks beyond the magical $100,000 value. As such, most of the put options have gone worthless due to this bull run, which tends to favor the bulls since the majority were written at prices far below the current levels.

For perspective, that level of options expiry alone can generate a “gamma squeeze,” where price gyrations occur in sharp spikes while hedging exposure by market makers covering their positions. Simply speaking, it results in very considerable price changes when traders close or adjust their postions.