Bitcoin Market Braces for Major $10.1 Billion Options Expiry Amid Bullish Forecasts
Summary:
Bitcoin's market is gearing up for a $10.1 billion options expiry on Dec. 29. The Chicago Mercantile Exchange stands second with a surprising $1.38 billion open interest. The potential approval of a spot Bitcoin ETF in January is significantly affecting the December options expiry. Binance's recent plea deal with US authorities highlights the transforming cryptocurrency environment towards compliance. Four likely scenarios have been drawn based on current price action, and a 3% price drop to $41,900 is required by bears to level the playing field before the monthly expiry.
Bitcoin's (BTC) market is bracing itself for a sizeable $10.1 billion options expiration, slated for Dec. 29 at 8:00 am ET. Current data suggests that call (buy) options are holding the edge, although a Bitcoin price below $42,000 could help bears trim their losses substantially. There are motivators for both parties to sway the spot price of Bitcoin, and the result can be estimated as the deadline inches closer based on the expiry price. The options market giant, Deribit, boasts a staggering $7.7 billion open interest, however, the surprise jumps from the second place contender, the Chicago Mercantile Exchange (CME), that holds $1.38 billion. CME's open interest has more than twice that of OKX's $630 million, who sits in the third position.
The potential approval of a spot Bitcoin exchange-traded fund (ETF) in January significantly influences the December options expiration. The US Securities and Exchange Commission (SEC) has notably shifted its approach when dealing with ETF proponents, favoring engagement over outright refusals. It is seen as a positive sign and fuels the anticipations of a possible ETF approval in January. This is possibly why bears may find it challenging to suppress Bitcoin's price beneath $40,000 before the year-end BTC options expiry.
Another crucial occurrence is Binance's recent compliance agreement with the US Department of Justice and regulators, highlighting the changing cryptocurrency environment towards compliance and Anti-Money Laundering practices. These changes highlight the growing integrations into the mainstream financial ecosystem, thus bolstering the chances of approving a spot ETF, especially after the reshuffling of the Grayscale Investments' board and its subsequent reapplication to convert the Grayscale GBTC Trust.
The total open interest for the December options expiry is standing at $10.1 billion. That said, it is projected that the final figure will be significantly less, as the unexpected rally above $40,000 has left bearish investors surprised, as can be seen from the Deribit Bitcoin options interest graph.
The cumulative open interest of Deribit and CME options sits at $9 billion, with put (sell) options being underrepresented by 32%, indicating an imbalance in comparison to the $5.4 billion in call (buy) open interest. Nonetheless, seeing that Bitcoin has surged 25% since November, majority of put (sell) options are likely to end up worthless.
Four most likely scenarios have been forecasted depending on the current price action, with the theoretical profit determined by the imbalance favoring each side. A crude estimate disregards sophisticated investment strategies, due to no direct method to gauge this effect.
For bears to have a fair game before the monthly expiration, they need to orchestrate a modest 3% price drop to $41,900. On the contrary, bulls ought to push above $44,000 to secure a $1.15 billion advantage on Dec. 29. Even so, the possible large sum for call option holders could be a trigger for additional price gains ahead of the January ETF decision.
This article provides no investment advice or suggestions. Each investment and trading move has inherent risks, and readers are advised to perform their own research before making a decision.
Published At
12/27/2023 11:15:00 PM
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