Forget max pain theory. Bitcoin is well below the $72,000 magnet going into $10 billion options expiry
Key takeaways
- On Friday at 8:00 ET, options worth $10 billion will expire on Deribit, the world's largest crypto options exchange.
- Max pain, as the name suggests, refers to the price level where options buyers – those who purchased call and put contracts to hedge against volatility – would lose the most money on expiry.
- The theory suggests that ahead of expiry, these option writers actively try to push the spot price toward the max pain level, effectively pinning bitcoin there.
On Friday at 8:00 ET, options worth $10 billion will expire on Deribit, the world's largest crypto options exchange.
Max pain, as the name suggests, refers to the price level where options buyers – those who purchased call and put contracts to hedge against volatility – would lose the most money on expiry. In that scenario, option buyers suffer maximum losses, while their counter parties who sold options (also known as writers) stand to benefit.
The theory suggests that ahead of expiry, these option writers actively try to push the spot price toward the max pain level, effectively pinning bitcoin there. Crypto social media has long embraced the idea, particularly after BTC appeared to gravitate toward the max pain point ahead of several monthly and quarterly settlements in 2020–2021. That pattern, even if partly coincidental and driven by other market forces, helped solidify belief in the theory.