The crypto market is bracing for a massive structural reset on Friday, with billions of dollars worth of bitcoin BTC$89,664.53 and ether ETH$3,035.70 options set to expire on Deribit.

This colossal "Boxing Day" event, named for the holiday observed in many countries on Dec. 26, will see $23.6 billion in bitcoin options and $3.8 billion in ether options expire, that is they stop trading and are settled. These figures reflect the dollar values of active options contracts at press time, with each contract representing 1 BTC or 1 ETH.

According to Deribit, the expiry, which affects more than 50% of the total open interest on the centralized exchange, is characterized by bullish positioning.

"The max pain level sits near $96,000, while a put-call ratio of 0.38 reflects positioning skewed toward calls and a bullish bias," Sidrah Fariq, Deribit's global head of retail sales and business development, said in an interview on Telegram. The max pain price is the level where options buyers stand to lose the most money and options sellers, usually big institutions and market makers, make the most profit.

Options are derivative contracts that give the purchaser the right, but not the obligation, to buy or sell the underlying asset at a predetermined price at a later date. A call option buyer is implicitly bullish on the market, while a put buyer is bearish, looking to hedge against or profit from a potential price drop in the underlying asset.

The 'max pain' magnet

"Max pain" is one of the most watched figures as options expiry nears. Because of the profit/loss implications for the two sides of the contract, some observers suggest that it creates a tug-of-war between professional traders adjusting their hedges, often moving the spot price toward the max pain level as the clock ticks down.

In essence, supporters of the theory suggest it implies bitcoin could rise to $96,000 and ether to $3,100 by expiry.

Still, the max pain hypothesis remains a contentious and debated concept within the broader crypto derivatives landscape, with many market participants suggesting it has little effect on prices.

Bullish bias meets holiday lull

As for the put-call ratio, it indicates that for every 100 call options in play, there are only 38 puts.

It indicates just how bullish traders have been throughout the year, chasing bullish exposure via call options. At the time of writing, most open interest was concentrated in calls at strikes ranging from $100,000 to $116,000. Meanwhile, the $85,000 put was the most popular downside bet.

Large expiries like this one typically breed volatility as traders scramble to close trades or rollover, that is, shift, to new expiries. According to Fariq, some put options at strikes $70,000 to $85,000 are being rolled into January expiries.

"The decision to let December put open interest expire or extend them will determine whether downside risk is due to year-end risk or a structural risk reset," Fariq said.

Still, the impending settlement could be more orderly, she added.

"The huge expiry comes on Boxing Day. Volatility remains contained (Deribit’s BTC DVOL around 45), and while overall activity remains high and upside exposure dominates, holiday season thinned liquidity and ongoing macro uncertainty temper directional conviction," Fariq noted.

The DVOL is the index representing bitcoin's annualized 30-day implied or expected price turbulence. This options based metric has pulled back to 45% from 63% on Nov. 21 when BTC tanked to nearly $80,000 on some exchanges.

The decline indicates that the market’s sense of panic is fading and traders don't necessarily see outsized volatility due to expiry.