Crypto Traders Eye $6.8B Bitcoin and Ether Options Expiry

call options with strike prices at and above $30,000. As a result, that level has the highest open interest – or the number of active contracts – and market makers/dealers, who create order book liquidity by taking the other side of the investors' trades, hold a significant amount of"negative gamma" exposure.

In other words, if bitcoin builds momentum above $30,000 as expiry approaches, dealers will buy the cryptocurrency in the spot and futures markets. That, in turn, could lead to an exaggerated price rally, often called a gamma squeeze, or sling-shot effect. On the flip side, dealers will be forced to sell on a potential decline below $30,000.

Market makers provide liquidity to an order book and profit from the bid-ask spread by constantly hedging their gamma exposure to keep the book direction, or delta, neutral.According to crypto derivatives trader Christopher Newhouse, the impact of potential dealer hedging could be stronger than usual this time.

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