Bitcoin traders are preparing for an extended short-term correction, as options contracts of 118,000 BTC ($3.5 billion) expire on Jan. 29.

Bitcoin Price Volatility Ahead

Bitcoin’s price fell by a record percentage of 13.1% on Thursday. The price carnage led the coin’s value to fall to $28,800. 

According to options market data, volatility is expected to remain high until next Friday, with the largest volume of options of $3.5 billion notional volume expiring that day. 

The implied volatility of Bitcoin, which represents the market’s expectations for volatility, is near record highs of 6.2%—levels not seen since the  COVID-19-related crash in March. 

Higher levels of implied volatility also correspond to costly premiums for options contracts.

Deribit, which is responsible for 85% of options trading, has seen a high volume of put orders at strike prices of $31,000 and $28,000 since BTC plummeted yesterday. This suggests that traders are reducing their short-term risk against further downfall. 

Notably, 467 contracts for call options were also picked up at a strike price of $72,000. The above trade may represent a hedging order against short exposure. More likely, it represents a trader that opens up long interest after spot liquidation. 

The maximum pain level, where both call and put buyers incur maximum loss, is at $28,000. 

Disclosure: The author held Bitcoin at the time of publication.