Key takeaways:
Bears in the Bitcoin market maintain strong incentives beneath $114,000, likely increasing pressure before the options expiry.
Concerns about spending in the AI sector contribute to market turbulence and affect investors’ overall risk appetite.
On August 29, $13.8 billion in Bitcoin (BTC) options are set to expire, a moment that many traders believe could clarify whether the recent 9.7% correction signifies the end of Bitcoin’s bull market or just a brief pause. The decline to $112,100 on Thursday marked Bitcoin’s lowest point in six weeks, amplifying bearish momentum leading up to the monthly options expiry.
Ill-prepared bullish strategies for Bitcoin below $114,000
The open interest in call (buy) options stands at $7.44 billion, 17% more than the $6.37 billion in put (sell) contracts. However, the actual result will depend on Bitcoin’s price at 8:00 AM UTC on August 29. Deribit leads the market with an 85% share, followed by CME at 7% and OKX at 3%.
Bulls may have been overly optimistic, with some bets placed at $125,000 or higher. That optimism quickly faded following Bitcoin’s downturn, leading to a shift towards put instruments. Regardless of the reasons for the recent BTC price drop, traders who favored bullish strategies may find themselves disappointed.
Deribit options open interest for August 29, BTC. Source: Deribit
Only 12% of call options were executed at $115,000 or below, leaving most out-of-the-money at current levels. In contrast, 21% of puts are set at $115,000 or higher, with notable clusters at $112,000. Hence, it’s reasonable to expect bears to continue exerting downward pressure on Bitcoin’s price ahead of the monthly expiry.
It might be premature to declare bullish options strategies a total loss. Traders are awaiting comments from US Federal Reserve Chair Jerome Powell on Friday; any indication of increased odds of rate cuts could bolster asset prices. Recent jobless claims data from the US, which were hotter than expected, further heighten that anticipation and maintain a high level of macroeconomic uncertainty.
Related: Why is Bitcoin crashing and will $112K be the final bottom?
Impact of the US Federal Reserve and tech stocks on Bitcoin’s fate
Here are five likely scenarios at Deribit based on current price trends. These outcomes predict theoretical profits based on open interest imbalances, excluding more complex strategies like selling put options for upside exposure.
Between $105,000 and $110,000: $210 million in calls (buy) against $2.66 billion in puts (sell). The net result favors puts by $2.45 billion.
Between $110,100 and $114,000: $420 million in calls versus $1.94 billion in puts, favoring puts by $1.5 billion.
Between $114,100 and $116,000: $795 million in calls against $1.15 billion in puts, favoring puts by $360 million.
Between $116,100 and $118,000: $1.3 billion in calls versus $830 million in puts, favoring calls by $460 million.
Between $118,100 and $120,000: $1.7 billion in calls against $560 million in puts, favoring calls by $1.1 billion.
For bullish strategies to succeed, Bitcoin would need to trade above $116,000 by August 29. However, the most vital struggle remains at $114,000, where bears are highly motivated to push prices downward.
Ultimately, Bitcoin’s performance in the $13.8 billion monthly options expiry will be influenced by broader macroeconomic factors, including investor concerns about the artificial intelligence sector. These worries intensified following Morgan Stanley cautioning that escalating expenditures may restrict major tech companies’ ability to conduct share buybacks, increasing caution in equity markets.
This article is for informational purposes only and should not be considered legal or investment advice. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.
