As $11 billion worth of options contracts come due this week, Bitcoin traders are bracing for potentially more violent price swings. The expiry also lands just days before the US midterm elections, which could add further uncertainty to the cryptocurrency market. Contracts expiring on October 30 account for roughly one-third of all outstanding Bitcoin options on the trading platform Deribit; options give holders the right to buy or sell Bitcoin at a preset price. Bitcoin has been under persistent pressure, slipping below $80,000 on Monday and then hovering around that level for the rest of the week. Many of the soon-to-expire contracts are betting on prices that now look out of reach in the near term. Bullish options outnumber bearish ones, with a large cluster of contracts concentrated at strike prices of $90,000, $95,000 and $100,000. Those higher-strike contracts will most likely expire worthless. For contracts tied to levels closer to Bitcoin's current trading price, the risk is far less clear-cut. As cryptocurrency prices move, market makers must buy or sell Bitcoin to hedge their own exposure. Adam Haeems, head of asset management at Tesseract Group, said about 70% of the Gamma in the expiring options, a measure of how sensitive market makers' hedging needs are to changes in Bitcoin's price, is concentrated in the $75,000 to $82,000 range. Below the $80,000 strike, bearish Bitcoin options outnumber bullish ones by more than 2 to 1. Adam Haeems said public data does not reveal which side market makers hold in these trades. He noted that if market makers are short, their hedging could accelerate a Bitcoin drop through the $75,000 to $78,000 range, while if traders are long, it could help cushion the decline. After Friday, Bitcoin volatility could rise further. Investors who hold Bitcoin and hedge by selling options typically roll into a fresh batch of options once the old ones expire. But Caroline Mauron, co-founder of Orbit Markets, said these options sellers may now wait until after the US midterm elections on November 3 before acting, which would make price swings more extreme. Caroline Mauron said: "This could lead to higher volatility around the release of election results, because the Gamma supply that normally exists is drying up." That means there will be fewer options sellers in the market able to dampen price swings. A shift in control of the US Congress will affect President Donald Trump's ability to advance his pro-crypto policy agenda and could provide another catalyst that pushes Bitcoin up or down. Trump has already delivered part of his policy agenda through a law regulating stablecoins and through looser rules allowing tokenized stocks and other crypto products to be issued in the United States. However, a key piece of regulatory legislation known as the CLARITY Act failed to advance in the Senate in September, when Republicans held only a narrow majority. If Democrats win control of both the House and the Senate, concerns that the crypto industry will face stricter regulation could revive over the remaining two years of Trump's second term. According to a Market Pulse survey, the median year-end Bitcoin price forecast is $90,800 if Republicans keep control of both chambers, versus $76,450 if Democrats control both. If Congress is split between the two parties, the median forecast is $84,100. Paul Howard, a senior director at Wincent, said the midterm elections could prompt investors to buy more put options with strike prices near Bitcoin's current level to protect themselves against further declines. Paul Howard said: "Given that volatility has been at historic lows over the past year, I expect a clear pickup in volatility in November." He added that he expects more positions in the market designed to profit from price swings.
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