Record $31B Bitcoin Options Expire Amid Market Volatility

The cryptocurrency derivatives market is bracing for impact as $31 billion worth of Bitcoin options approach expiration on October 31st, setting a new monthly record that significantly surpasses last month’s $18 billion expiry. This massive expiration event comes despite the dramatic October 10th flash crash that eliminated $19 billion in leveraged positions across the market. According to Bitfinex analysts, that single event erased roughly $7 billion in BTC options open interest, bringing total open interest down from approximately $38 billion to near $31 billion in what represented the sharpest weekly contraction since June.

The distribution of these expiring contracts reveals significant concentration across major exchanges. Leading crypto derivatives platform Deribit, which was acquired by Coinbase earlier this year, holds $14 billion worth of options contracts set to expire next Friday. Meanwhile, CME, the world’s largest derivatives exchange, carries another $13.5 billion in Bitcoin options expiring simultaneously. The sheer scale of these positions creates what analysts describe as a potential volatility catalyst, with historical precedent suggesting that large expiries often suppress volatility leading into the cut-off, then result in clearer directional moves in the 24-72 hours that follow expiration.

Despite the recent market turbulence, Bitcoin options open interest at Deribit has surged to a record $50.27 billion notional value across 453,820 active contracts this week, more than doubling year-to-date according to the exchange’s chief commercial officer. This remarkable growth reflects heightened institutional hedging against downside risks in a market that continues to attract significant capital despite recent volatility. The concentration of specific strike prices reveals where traders are placing their most significant bets, with a notable $2 billion worth of open interest in put contracts at the $100,000 strike price, indicating substantial bearish positioning at that level.

On the bullish side, call contracts are clustering at the $120,000 level, suggesting traders are positioning for potential rebounds or volatility plays above current price levels. As of Friday morning, Bitcoin was trading at $109,866 according to crypto price aggregator CoinGecko, having gained 0.2% in the past day. This positioning around key psychological levels creates what market participants describe as potential inflection points that could determine the next major directional move in Bitcoin’s price trajectory.

Even after the October flash crash that wiped out $19 billion in leveraged positions, analysts caution that significant leverage remains in the market, setting the stage for potential cascade events. Carlos Guzman, researcher at GSR, explained the dynamics following the October 10th crash: “These levels of leverage create the potential for a cascade dynamic. People take significant leverage that might seem individually rational. If one person got liquidated in isolation, that’s fine. There might be liquidity in the market to patch that, and it won’t be the worst. But if one liquidation leads to another liquidation, and another liquidation, then you’re absorbing all of the market’s liquidity.”

Cascading liquidations occur when Bitcoin’s price takes a sudden dip, causing leveraged long positions—traders using borrowed capital to bet on future price appreciation—to be forcibly closed. These leveraged traders become forced sellers, adding further downward pressure to the price, which then triggers additional liquidations in a self-reinforcing cycle until the leverage is flushed from the system. The Bitfinex analysts noted that despite these risks, the slow rebuild of open interest following the October crash isn’t necessarily a sign that traders have lost conviction in Bitcoin, pointing out that “large OI wipes to the tune of 20-40% of the total open interest across all strikes usually resolves in higher prices after the flush is over.”

Beyond technical factors, macroeconomic developments are playing a crucial role in market sentiment. Traders are pricing in a 97% chance that the Federal Open Markets Committee will approve another rate cut at next week’s meeting according to the CME FedWatch Tool. This expectation follows softer-than-expected U.S. inflation data that has reshaped market expectations around Federal Reserve policy. The market has repriced the skew lower after a mid-month rally as two Fed rate cuts by year-end are now fully priced in, creating a more accommodative monetary policy backdrop for risk assets including Bitcoin.

Meanwhile, Bitcoin ETF flows have shown significant volatility throughout October. The first week saw $2.7 billion worth of net inflows, which dramatically reversed into a $1.2 billion outflow during the second week following the October 10th deleveraging event. According to data from asset manager Farside Investors, Bitcoin funds have pulled in $356 million worth of net inflows so far this week, indicating a tentative recovery in institutional interest. The Bitfinex analysts added context to the current market phase, noting that “the time horizon for this is multiple months and a consolidation period is completely normal, even if we are nearing the end of our bull trend, we do not believe the top is in now,” suggesting that despite near-term volatility, the longer-term bullish case for Bitcoin remains intact.