A combination of macroeconomic and cryptocurrency-specific factors is predicted to impact the USD 1.9 billion options expiration this week.
The approaching monthly Bitcoin options expiration on August 25th, worth USD 1.9 billion, is crucial to determine if the support level of USD 26,000 will remain steady. It may seem reasonable to attribute the recent sell-off in the cryptocurrency market to the US Securities and Exchange Commission (SEC) postponing its decision on Bitcoin spot exchange-traded funds. However, the macroeconomic perspective must also be taken into account.
If the Federal Reserve manages to control inflation, the U.S. dollar will probably continue to strengthen. This was clear on August 22nd when the US dollar index (DXY), which measures the dollar against other currencies, reached its highest point in 76 days.
Bitcoin bulls need to make sure that the Bitcoin price stays above USD 27,000 before August 25th to avoid a potential loss of GBP 280 million from the monthly expiration of Bitcoin options.
Bitcoin Bearish Will Benefit from the Threat of Tough Regulation
Cryptocurrency bulls have been facing regulatory challenges recently. This is because two major cryptocurrency exchanges, Binance and Coinbase, are currently involved in lawsuits with the SEC. Furthermore, the SEC is appealing Ripple’s initial victory against them.
Bitstamp has also recently announced its decision to discontinue its US-based betting services. A major issue in the current US regulatory situation is whether Ether is a commodity or security.
Binance has informed that it has suspended its cryptocurrency debit card offerings in Latin America and the Middle East. This is due to reports that Binance also stopped euro withdrawals and deposits via SEPA on 20th August. The exchange clarified that there is no specific timeframe for restoring service.
Data Indicates that bulls Were overly Optimistic about Bitcoin Price
The open interest for options expiring on August 25th amounts to £1.9 billion. However, the final amount is expected to be lower due to some traders banking on the price to reach USD 29,000 or even higher. The unexpected 12% correction in Bitcoin’s price from August 14th to August 19th is noticeable in Deribit’s Bitcoin options interest chart, and it caught bullish investors off guard.
The ratio of call and put options, at 0.56, exposes a disparity between the USD 1.2 billion of open interest seen in the call options and the USD 685 million observed in the put options. However, if Bitcoin’s value sustains at roughly USD 26,500 come 8:00 am UTC on August 25th, only USD 35 million worth of call options would remain available. This happens because the option to purchase Bitcoin at USD 27,000 or USD 28,000 has no value if BTC is traded below that level when it expires.
Bitcoin Bearish Traders Target below USD 26,000 to Maximize their Profits
The amount of available option contracts for call and put instruments on August 25th changes based on the expiration price. The difference in the number of contracts between the two sides represents the projected profit.
Given Bitcoin’s repeated falls below the USD 19,000 support level between 21 and 23 August, it wouldn’t be unexpected if this level is tested again before options expire. Additionally, with the cryptocurrency’s current regulatory environment, there is minimal motivation for Bitcoin bulls to overturn the existing bearish trend following the USD 1.4 billion monthly options expiration.
By Audy Castañeda
