Bitcoin BTC +3.58% active options data shows the largest cluster of contracts outstanding are calls with a strike price of $50,000, set to expire on January 26.

According to Deribit data, there are over 8,300 contracts outstanding for calls at the strike price of $50,000, with a notional value of over $376 million.

In options trading, a call option gives the holder the right, but not the obligation, to buy the underlying asset at a specified price before or on the expiration date.

The fact that there is a large cohort of call options at $50,000 suggests that a considerable number of traders could be anticipating that the price of bitcoin will rise above $50,000 by the end of the January expiration date.

The majority of contracts outstanding for the January 26 bitcoin options expiry are for calls at a strike price of $50,000. Image: Deribit.

There is a big focus on the $50,000 mark across all expiry dates on Deribit. The data shows there are more than 21,800 contracts oustanding for calls at that strike price, with a notional value of $926 million.

According to Velo Data, the derivatives trading skew is tilted towards options for buying bitcoin at an even higher strike price. Charts from data across multiple exchanges show that the largest group of contracts outstanding are for call options at $60,000 for the January 26 expiry.

BTC active options charts show the largest cohort being calls at $60,000 going into the January 26 expiry date. Image: Velo Data.

However, it's important to note that market conditions can change rapidly, and various factors can influence the actual price movement of bitcoin, such as high leverage trading. Leverage allows traders to control a position size with a smaller amount of capital. While this can amplify profits, it also magnifies losses. As traders take larger positions, price swings are intensified, contributing to increased volatility.

Spike in liquidations of bitcoin leveraged positions

The recent drop in the bitcoin price has led to a substantial liquidation of long positions on centralized exchanges. The volatility resulted in the liquidations of more than $147 million in bitcoin positions, with the majority ($127 million) being longs.

The overall crypto market saw over $571 million of liquidated long positions in the last 24 hours, contributing to a total of $642 million in liquidations across various centralized exchanges, according to CoinGlass data.

In derivatives markets, liquidations take place when a trader's position is forcibly closed due to insufficient funds to cover losses. This situation arises when market movements are unfavorable to the trader's position, resulting in the depletion of their initial margin or collateral.

In the past 24 hours, bitcoin pulled back below $43,000, a capitulation of over 6% in the past 24 hours. The retrace comes after the digital asset broke through a year-to-date high of over $45,800 on Tuesday. According to The Block's Prices Page, the largest digital asset by market capitalization is now changing hands for $42,273, at 7:30 a.m. ET.