Before Friday’s expiration, Bitcoin options are tempting bears to drive the price of BTC below $30k
The $600 million BTC options expiry this week gives the bitcoin bears a chance to score a rare victory.
Expirations of Bitcoin options coincide with volatility
Reviewing Bitcoin’s recent price action reveals that three of the last four BTC option expirations resulted in sizable price changes, necessitating traders’ close attention to these occurrences.
Notably, the weekly 8:00 AM UTC options expiry has consistently resulted in large price movements for Bitcoin. The size of these price movements justifies considerable care in the lead-up to the weekly expiry on July 21 even though causality cannot be proven.
tighter rules help bitcoin holders
While this week’s options expiry may give bearish short-term influence over Bitcoin’s price, bulls may ultimately benefit from the US Securities and Exchange Commission’s consideration of proposals for spot exchange-traded funds.
Although regulatory review of these plans is still in its early stages, the delayed development would help to explain why the bears have repeatedly held $31,000 since late June.
However, the deteriorating regulatory climate is their best hope of keeping Bitcoin’s price below $30,000 at this time. Due to a lack of legislative clarity in the United States, the global securities exchange Nasdaq postponed the debut of its cryptocurrency custodial service on July 19. Adena Friedman, CEO of Nasdaq, explained why this change in strategy was necessary.
Additionally, the cryptocurrency exchange Coinbase said on July 14 that it will no longer be providing staking services to customers in Wisconsin, South Carolina, New Jersey, and California. This choice came as a result of an SEC lawsuit filed on June 6 accusing the exchange of acting as an unregistered security broker since 2019.
Overconfidence among bitcoin bulls results in a poor result.
On July 13 and 14, Bitcoin’s price momentarily topped $31,000, encouraging bullish wagers by traders utilizing options contracts. A four-hour fix,
The difference in open interest between the $430 million call (buy) options and the $170 million put (sell) options is reflected in the 0.39 put-to-call ratio. However, because the bulls were overconfident, the outcome will be less than the $600 million total open interest.
If Bitcoin trades at $30,500 at 8:00 AM UTC on July 14, for instance, just $18 million in call options will be taken into account. This discrepancy results from the fact that if BTC trades below those levels when the option to purchase Bitcoin for $31,000 or $32,000 expires, it is no longer legitimate.
The three eventualities that are most likely, given the price movement right now, are listed below. Depending on the expiration price, there are different numbers of options contracts for call (buy) and put (sell) instruments available on July 21. The potential profit is the difference that favors either side:
Between $28,000 and $30,000: 100 calls vs. 2,400 puts. The net result favors the put (sell) instruments by $70 million.
Between $30,000 and $31,000: 600 calls vs. 1,800 puts. The net result favors the put (sell) instruments by $35 million.
Between $31,000 and $32,000: 3,100 calls vs. 1,400 puts. The net result favors the call (buy) instruments by $55 million.
As of July 21, 2023, the crypto price index shows continued volatility, with major cryptocurrencies experiencing fluctuations in value. Bitcoin surges while altcoins struggle to find stability.
Given the recent mediocre macroeconomic statistics, it’s likely that bears will keep driving down the price of Bitcoin until Friday’s expiration. In addition, China’s second-quarter GDP increased by 6.3% year-on-year rather than the 7.3% market forecast. In contrast, June’s growth in U.S. retail sales was 0.2% over May, which was less than the 0.5% consensus.
As a result, the bulls are in a difficult situation because their call (buy) instruments will become invalid if Bitcoin’s expiry price drops below $30,000. The bears’ $35 million gain may not be a significant one, but it does raise the possibility that $30,000 will emerge as a new region of resistance.