Bitcoin options tempting bears to push price below $30K by Friday’s expiry.

Bitcoin options tempting bears to push price below $30K by Friday's expiry.

The Impact of Bitcoin Options Expiries on the Blockchain Industry

This week’s Bitcoin (BTC) options’ expiry on Friday, July 21 could solidify the $30,000 resistance level and give the bears the upper hand for the first time since the 21% rally between June 14 and June 21.

The blockchain industry has been buzzing with anticipation as Bitcoin’s options expiration date approaches. Historical data suggests that the expiration of BTC options has triggered significant price movements in the past, making it a crucial event for traders to pay close attention to. While causation cannot be firmly established, the magnitude of these price swings warrants extreme caution leading up to the weekly expiry on July 21.

Bitcoin Options Expiries Coincide with Volatility

A review of Bitcoin’s recent price action reveals a pattern of strong reactions following the weekly 8:00 am UTC options expiration. Traders have observed that three out of the last four BTC options expiries have resulted in significant price movements. While it is important to note that correlation does not imply causation, the consistency of these price swings underscores the significance of this event.

To illustrate the impact of options expiries on Bitcoin’s price, let’s consider the rally between June 14 and June 21, where Bitcoin experienced a remarkable 21% increase in value. This rally was followed by a consolidation period, and now, with the approaching options expiry, the $30,000 resistance level could solidify. This scenario would give the bears the upper hand and potentially mark a shift in market sentiment.

Bitcoin Bears Benefit from Stricter Regulations

While the options expiry could give bears control of Bitcoin’s price in the short term, bulls still have some potential advantages. One such advantage lies in the review of spot ETF proposals by the U.S. Securities and Exchange Commission (SEC). These proposals, though still in the early stages of regulatory scrutiny, could have a positive impact on Bitcoin’s price.

However, the bears’ best chance of keeping Bitcoin’s price below $30,000 lies in the worsening regulatory environment. Recent events, such as Nasdaq’s suspension of its cryptocurrency custodian solution due to a lack of regulatory clarity in the U.S., exemplify the challenges faced by the industry. Additionally, Coinbase’s suspension of staking services for clients in certain states following a lawsuit from the SEC further adds to the regulatory uncertainties.

Bitcoin Bulls’ Over-optimism Leads to a Disappointing Outcome

Bitcoin bulls have been fueled by the brief surpassing of the $31,000 mark on July 13 and July 14. This upward movement led to bullish bets from traders using options contracts. However, a subsequent correction brought the price back down to $30,000, leading to a disappointing outcome for the bulls.

The options market provides insights into the sentiment of traders. The current put-to-call ratio, which reflects the difference in open interest between buy and sell options, indicates that the outcome will be lower than the total open interest. This discrepancy arises from the overconfidence of the bulls.

Let’s examine the three most likely scenarios based on the current price action:

  1. Between $28,000 and $30,000: 100 calls vs. 2,400 puts. The net result favors the put (sell) instruments by $70 million.
  2. Between $30,000 and $31,000: 600 calls vs. 1,800 puts. The net result favors the put (sell) instruments by $35 million.
  3. Between $31,000 and $32,000: 3,100 calls vs. 1,400 puts. The net result favors the call (buy) instruments by $55 million.

Considering the recent weak macroeconomic indicators, it is likely that bears will continue to suppress Bitcoin’s price until the expiry date. China’s second-quarter gross domestic product (GDP) growth fell short of expectations, and U.S. retail sales in June also missed the consensus. These factors contribute to the challenging position that the bulls find themselves in.

Consequently, the bears’ $35 million favorable outcome may not be a significant win, but it does increase the chances of $30,000 becoming a new resistance area in the blockchain industry.

In conclusion, Bitcoin options expiries have a significant impact on the blockchain industry. Traders and investors should closely monitor these events, as they can provide valuable insights into market sentiment and potential price movements. The regulatory landscape and macroeconomic indicators also play a crucial role in shaping the market dynamics. As the industry continues to evolve, it is essential for participants to stay informed and adapt to the changing landscape of the blockchain industry.