Critical Bitcoin Options Expiration Could Impact $26,000 Support Level
Summary:
Bitcoin's monthly options expiration worth $3 billion on September 29th is crucial for the $26,000 support level. While Bitcoin's recognition in China is growing, spot exchange trading volumes have reached a five-year low due to fears over the macroeconomic outlook. Traditional financial institutions show increased unease towards managing crypto-related transactions. The open interest for September 29th options expiration stands at $3 billion, but a failed attempt to pass $27,200 might have led to overconfidence among Bitcoin investors. The likelihood of Bitcoin's price dropping below $26,000 by September 29 remains high.
On September 29th, the critical expiration of Bitcoin (BTC) monthly options worth $3 billion might be crucial for upholding the $26,000 support level. Bitcoin’s status in China seems to be solidifying, demonstrated by a court ruling in Shanghai recognizing digital currencies as unique and non-copyable. However, Bitcoin's spot exchange trading volumes have slipped to their lowest in half a decade according to CryptoQuant, a blockchain analytics firm, with analyst Caue Oliveira attributing the dip to growing concerns over the global economic outlook.
Though long-term holder numbers are on the upswing, the drop in trading volume could enhance volatility, leading to market instability brought on by fluctuating derivative contract prices due to less active participants. Meanwhile, traditional financial organizations are displaying reluctance in dealing with crypto-related transactions. Notably, JPMorgan Chase, North America's biggest bank, is said to be blocking transfers correlated to cryptocurrency in its retail division, Chase, as a preventive measure against potential scams.
Bitcoin investors are attentively observing the Dollar Strength Index (DXY), which measures dollar potency against other currencies, as it reached a 10-month peak of 106 on September 26. This index has been known to have a reverse correlation with risk-on assets, tending to climb when investors seek the safety of liquid assets.
In expectation of Bitcoin's price ascending to $27,000 and beyond, the open interest for the options expiration on September 29 stands at $3 billion, but the actual volume is expected to lessen due to bullish sentiment. The failed bid to exceed $27,200 on September 19 might have spurred overconfidence among Bitcoin investors.
A variance occurs between the $1.9 billion in call (buy) open interest and the $1.1 billion in put (sell) options, reflected in a 0.58 put-to-call ratio. Should Bitcoin's price remain around $26,300 at 8:00 am UTC on August 25, only $120 million of the call (buy) options will be valid. This discrepancy stems from the fact that the right to purchase Bitcoin at $27,000 or $28,000 becomes meaningless if the BTC price falls below this level at expiry.
For Bitcoin bulls to level the playing field ahead of the monthly expiration, they’d need to achieve a 3.2% price hike from $26,200. Conversely, for the bears to obtain a $430 million edge on September 29, a slight 1% correction under $26,000 is all they need.
Given that Bitcoin traded under the $26,000 support level between September 1 and 11, it wouldn't be unheard of if this line were to dip again as options expiration draws near. Investor sentiment seems to be leaning towards being risk-averse, especially with the S&P 500 hitting its lowest mark since June. As such, without a noteworthy announcement or event significantly favoring Bitcoin bulls, the odds of BTC’s price dropping below $26,000 by September 29 remain high. This information is meant for general enlightenment and should not be interpreted as legal or investment guidance. The views, thoughts, and opinions herein are solely the author’s and do not necessarily represent the views and opinions of Cointelegraph.
Published At
9/27/2023 6:50:45 AM
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