Saturday, December 5, 2020
Home Decrypt News Bitcoin's Price Holds Steady After $1 Billion of Options Expire

Bitcoin's Price Holds Steady After $1 Billion of Options Expire

Bitcoin price remains steady, even though almost $1 billion in options expired yesterday and a hacker drew $150 million worth of cryptocurrencies from KuCoin, a major cryptocurrency exchange.

Despite all the tumult,  the price of Bitcoin held strong, increasing by 1.1% over the past day to $10,727, according to data by CoinMarketCap

And the stability persisted amid higher-than-usual trading volumes. On Thursday, trading volumes for the coin, which is the largest by market capitalization, doubled from $24 billion to $52 billion. Trading volumes have held relatively steady ever since.

So, why might more volatility have been expected? Two reasons, the first of which is the expiry of almost $1 billion worth of Bitcoin options, or about half of Bitcoin’s options contracts.

Bitcoin options are like futures contracts—way back in the past, people sign contracts to buy Bitcoin at a certain price at some point in the future. Ideally, Bitcoin will have increased in price, meaning that those signing the contracts secure Bitcoin at price below market value.

Futures contracts oblige the signatory to buy the Bitcoin upon expiry, whereas Bitcoin options contracts merely give them the option, with no obligation to purchase them.

As such, this could have been a major point of volatility, particularly if people dumped all that extra Bitcoin on the market. That could have caused price fluctuations. But, alas, this has not happened.

The second event that threatened the cryptocurrency market with volatility was yesterday’s KuCoin hack, in which hackers stole at least $150 million worth of Ethereum-based cryptocurrencies and an undisclosed amount of cryptocurrencies on other blockchains, among them Bitcoin.

Once again, hackers could have dumped these cryptocurrencies on the market, crashing it in the resulting chaos. But…this hasn’t affected Bitcoin.  

So, Bitcoin’s survived a crazy 24 hours. For now.


The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

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