The upcoming $3 billion in Bitcoin (BTC) monthly options expiration on Sept. 29 could have a significant impact on the $26,000 support level. The outcome of this expiration will likely be pivotal for the direction of the Bitcoin price.
On one hand, Bitcoin’s recognition in China seems to be strengthening. A recent judicial report from a Shanghai Court acknowledged digital currencies as unique and non-replicable. This recognition may contribute to increased adoption and acceptance of Bitcoin in the country.
However, Bitcoin’s spot exchange trading volumes have dwindled to a five-year low, as reported by on-chain analytics firm CryptoQuant. This decline in trading activity can be attributed to growing fear surrounding the macroeconomic outlook. Investors are becoming more cautious and hesitant to engage in trading due to the uncertain economic climate.
Furthermore, traditional financial institutions like JPMorgan Chase are becoming apprehensive about handling crypto-related payments. JPMorgan Chase, the largest bank in North America, is reportedly prohibiting transfers “related to crypto assets” within its retail division, Chase. This move is aimed at protecting against potential involvement in fraudulent or scam activities.
Additionally, the Dollar Strength Index (DXY), which measures the dollar’s strength against other currencies, recently reached its highest level in 10 months. Historically, this index exhibits an inverse correlation with risk-on assets. As investors seek safety in cash positions, the rise in the DXY may signal a decrease in demand for Bitcoin and other riskier assets.
Looking at the options expiration, there is a significant amount of open interest, currently standing at $3 billion. However, it is expected that the final amount will be lower due to bullish expectations of Bitcoin’s price reaching $27,000 or higher. The unsuccessful attempt to break above $27,200 earlier this month may have contributed to overconfidence among Bitcoin investors.
The put-to-call ratio of 0.58 reflects an imbalance between the buy and sell options. There is $1.9 billion in call (buy) open interest compared to $1.1 billion in put (sell) options. Nevertheless, if Bitcoin’s price remains near $26,300, only $120 million worth of call options will be available. This difference occurs because the right to buy Bitcoin at $27,000 or $28,000 becomes worthless if the price is below those levels on expiration.
Based on the current price action, several scenarios can be identified for the options expiration. The number of contracts available for call and put instruments varies depending on the expiry price, with each side favoring either the call or put options. The net result of these scenarios could significantly impact the market.
For the bulls to level the playing field, they would need to achieve a 3.2% price increase from $26,200. On the other hand, the bears only need a modest 1% correction below $26,000 to gain a $430 million advantage. Given Bitcoin’s previous trading below the $26,000 support level and the increasing risk-aversion among investors, the likelihood of breaking below $26,000 by Sept. 29 remains high, unless there is significant news or an event that favors Bitcoin bulls.
In conclusion, the upcoming Bitcoin options expiration on Sept. 29 holds great significance for the $26,000 support level. The outcome of this expiration will likely determine the direction of the Bitcoin price, considering factors such as reduced trading volumes, regulatory concerns, and the dollar’s strength. It remains to be seen how this will play out, but cautious investors should be aware of the potential market volatility during this period.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views and opinions expressed are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
