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Key points to consider:
Bitcoin bears are likely to exert significant pressure below $114,000, especially as the options expiry approaches.
Concerns surrounding AI sector expenditures are creating volatility and impacting investors’ overall risk appetite.
On August 29, a total of $13.8 billion in Bitcoin (BTC) options will expire—a date many traders see as crucial in determining whether the recent 9.7% correction signifies the end of Bitcoin’s bullish trajectory or merely a brief pause. The drop to $112,100 on Thursday marked Bitcoin’s lowest value in six weeks, amplifying bearish sentiment ahead of the upcoming monthly options expiry.
Overly optimistic bullish Bitcoin strategies face challenges below $114,000
The current open interest for call (buy) options totals $7.44 billion, which is 17% greater than the $6.37 billion in put (sell) contracts. However, the ultimate outcome will depend on Bitcoin’s price at 8:00 am UTC on August 29. Deribit commands a significant market share at 85%, while CME and OKX follow with 7% and 3%, respectively.
Bullish betters may have been overly optimistic, with some placing wagers at $125,000 or higher. This optimism has waned significantly following Bitcoin’s price drop, redirecting momentum towards put options. Regardless of the reasons behind the recent correction in BTC pricing, traders who favored bullish strategies are likely to be disheartened.
Only 12% of call options were placed at $115,000 or below, leaving the majority out of the money at current levels. In comparison, 21% of puts are positioned at $115,000 or higher, with notable concentrations at $112,000. Therefore, it is reasonable to anticipate that bears will continue to exert downward pressure on Bitcoin’s price as the monthly expiry approaches.
However, it may be premature to declare the bullish options strategies entirely defeated. Traders are eagerly waiting for remarks from US Federal Reserve Chair Jerome Powell on Friday, as any indication of a higher likelihood of rate cuts could bolster asset prices. Additionally, hotter-than-anticipated US jobless claims data released on Thursday has heightened such expectations, leaving macroeconomic uncertainty at elevated levels.
Related: What’s causing the Bitcoin crash, and could $112K be the ultimate bottom?
The US Federal Reserve and tech stocks could influence Bitcoin’s future
Here are five potential scenarios at Deribit based on current price trends, estimating theoretical profits based on open interest imbalances while excluding intricate strategies like selling put options to gain upside price exposure.
Between $105,000 and $110,000: $210 million in calls (buy) versus $2.66 billion in puts (sell), favoring puts by $2.45 billion.
Between $110,100 and $114,000: $420 million in calls against $1.94 billion in puts, which favors puts by $1.5 billion.
Between $114,100 and $116,000: $795 million in calls compared to $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, giving an advantage to calls by $460 million.
Between $118,100 and $120,000: $1.7 billion in calls versus $560 million in puts, favoring calls by $1.1 billion.
For bullish strategies to gain momentum, Bitcoin must trade above $116,000 by August 29. However, the key resistance level remains at $114,000, where bears are exceptionally motivated to push prices downward.
Ultimately, Bitcoin’s outcome in the $13.8 billion monthly options expiry will be influenced by broader macroeconomic factors, including widespread investor unease regarding the artificial intelligence sector. Concerns intensified after Morgan Stanley issued a warning that climbing expenditures could hinder major tech companies’ abilities to finance share buybacks, increasing caution within equity markets.
This article is intended for general informational purposes and should not be interpreted as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views or opinions of Cointelegraph.
