BTC reaches $90,000: $1.8 billion options expiration lifts hedging restrictions

In late January, the cryptocurrency market experienced a sharp volatility. Bitcoin options worth $1.81 billion expired, triggering intense battles around the key $90,000 level. This options expiration not only released long-standing hedging pressures but also vividly demonstrated how derivatives markets can profoundly impact spot prices. As hedging constraints gradually eased, Bitcoin ultimately broke through the psychological barrier and regained above $90,000.

Intense Volatility Triggered by Options Expiration

The event occurred in the early hours of January 23rd, Eastern Standard Time. As Bitcoin approached the psychological $90,000 mark, its price suddenly plunged sharply, dropping to around $88,800. This dip was not unexpected—it was a typical pre-expiration move.

According to data from leading crypto options exchange Deribit, the $1.81 billion contracts expiring this cycle settled at a put/call ratio of 0.74 and a “max pain” level of $92,000. What does this ratio and level imply? Simply put, market participants (traders, hedgers) prepared for higher volatility, with large positions concentrated near the strike price, making the spot market extremely sensitive at settlement.

Once these hedging positions began to adjust, they exerted significant pressure on the spot price—this is the core mechanism of what’s called “hedge constraints.”

ETF Outflows Worsen Downward Pressure

Another major factor pushing prices lower was the continued outflow from Bitcoin spot ETFs. Data showed a net withdrawal of $32 million on that day, marking the fourth consecutive day of redemptions.

While these outflows may seem like cold numbers, they reflect real investor sentiment. Analysts link the persistent redemptions to a climate of “extreme fear” triggered by turmoil in the Japanese bond market. When geopolitical and trade policy uncertainties arise, risk assets are among the first to be sold off, and Bitcoin, as a high-risk asset class, naturally suffers.

This dual pressure—hedging demand from options and macro risk sentiment—once kept Bitcoin’s price around $88,700.

Hedging Constraints Eased, Triggering a Strong Rebound

The turning point came after the options settlement was completed. Market data showed a dramatic moment: within just four hours, $83 million of short positions were closed, while only $8 million of longs were liquidated. This stark contrast indicated that short traders were heavily hit.

More importantly, once the hedging pressures associated with expiration were released, the risk previously bound to these positions was unleashed. Market participants realized that the $92,000 “max pain” level was not a stronghold but rather a springboard for upward movement.

Bitcoin then quickly rebounded, breaking through the $90,000 mark, with market capitalization returning to over $1.8 trillion. By the time of the event, Bitcoin’s price had risen to about $90,745, with upward momentum building and the next psychological level at $91,000 coming into view.

Deep Impact of Options Mechanics on the Spot Market

This event vividly reveals a key fact: options expiration is not just a derivatives market matter—it directly affects liquidity and volatility in the spot market. Deribit’s analysis pointed out that “expiration positions are tightly clustered around key strike prices, keeping the spot sensitive at expiry. Geopolitical and trade uncertainties remain macro factors supporting hedging demand and volatility responses.”

In other words, options expiration creates a hedging demand that temporarily constrains the spot market. When these constraints are lifted and positions are closed, the market can release suppressed buying pressure. That’s why Bitcoin was able to rebound more than $2,000 in a short period.

For traders and investors, understanding this mechanism is crucial. Options expiration often serves as a window for large position settlements, during which market volatility spikes and prices can behave extremely. But once these hedge constraints fade, the true supply and demand dynamics tend to dominate subsequent moves. This time, the market chose to break upward.