Bitcoin has suddenly shot higher, climbing after the expiration of $4.2 billion worth of bitcoin options contracts—allowing investors to buy or sell bitcoin at a specified price within a set time period—sent shockwaves through the crypto market.
The bitcoin price, still on track to end April down, jumped around 5% after the options expiry, climbing to just over $57,000 per bitcoin before falling back—though "joke" cryptocurrency dogecoin has left bitcoin in the dust this week.
With the bitcoin price breakout helping the crypto market to a strong end to the month, traders and investors are closely watching what May could bring.
Bitcoin has struggled this week after Telsa, led by bitcoin bull and dogecoin fan Elon Musk, revealed it sold 10% of its bitcoin holdings in March—but Musk helped to calm panicky markets.
Following the hotly-anticipated market debut of cryptocurrency exchange Coinbase, the bitcoin price came off the boil, falling back from an all-time high of almost $65,000 set on April 14.
Many bitcoin investors had been hoping April would bring a flood of fresh all-time highs, but bitcoin is set to close the month down around 3%.
"Needless to say, bitcoin didn't move the way many derivative traders expected this month," Nate Cox, the chief investment officer of digital assets investment company Two Prime, said via email.
However, expectations are already building for the month of May, with some bitcoin and cryptocurrency market watchers pointing to bitcoin's previous performances in the aftermath of other major options expiries as evidence the late April rebound will follow through to May.
"Historically, we have seen prices drop in the days leading up to bitcoin options expiry, only to rebound afterward, confirming the continued bullishness around bitcoin," Steve Ehrlich, the chief executive of Voyager Digital, said in emailed comments.
"We can look to the bitcoin options expiry in February as an example: we saw the price close around $57,540 on the Monday of the week of expiry and watched it fall steadily to around $46,340 by Friday, February 26, 2021, the day of the expiry. Afterward, we saw the price shoot back up, even breaking the $60,000 mark less than a month later on March 13. So while we experience a price drop in the days leading up to expiry, the bullishness around bitcoin picks the price back up thereafter."
Looking further ahead, June and its quarterly futures contract expiry could be shaping up to be the next milestone for options traders.
"It's interesting to see the next highest open interest is on the June expiry with 54,200 open interest, rather than May with only 35,700 open interest," Justin Chuh, senior trader at digital asset manager Wave Financial, said via email.
"Market participants may be looking to align themselves with the June quarterly futures contract and use that as price discovery for spot. Also, there seems to be a more even put:call ratio in June, usually we've seen heavier interest in calls [bets that the bitcoin price will rise], and buying puts [bets the price will fall] are expensive, but this may be an early indication that more investors may be worried about downside protection as time goes out."