Huge swings in bitcoin price aren't new, but big movements do make news. Understanding the catalysts that drive volatility can help you understand what's going on.
Traditional financial products can also have an impact on the market price of bitcoin, particularly derivative products that represent contracts that track the underlying price of BTC. As we’ve already discussed, leveraged futures trading can often fuel steep price changes, but so can other products such as. In short, crypto options give investors the right, but not the obligation, to buy or sell the underlying asset at a certain price prior to, or on, a certain date.
When a large number of out-of-the-money bitcoin options are due for expiry at the same time, it can sometimes impact bitcoin’s market volatility. OTM refers to when options are not profitable. For example, a call option is considered out-of-the-money when the strike price is higher than the current market price.to hedge with the underlying asset to reduce extended losses if bitcoin swings in the opposite direction.
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