The upcoming Bitcoin weekly options expiry on July 14 has the potential to significantly impact market sentiment, possibly leading to a breach below the crucial $30,000 support level. While the initial excitement surrounding spot Bitcoin exchange-traded fund (ETF) requests boosted bullish sentiments, recent macroeconomic data has not been favorable for risk-on assets.
Assessing market sentiment becomes essential in determining the likelihood of Bitcoin (BTC) maintaining its position above $30,000 by July 14. This particular level acts as a threshold that could provide bears with a perfect opportunity to profit up to $120 million through the weekly option expiry.
In June, the Consumer Price Index (CPI) in the United States registered at 3.0%, the lowest level since March 2021. This decline was primarily due to a 16.7% drop in the energy index. Lower inflation levels may seem positive in the short term, reflecting successful intervention by the Federal Reserve, but it remains above the target of 2%, which is detrimental to Bitcoin. Higher interest rates incentivize investors to shift towards fixed-income investments, diverting funds from cryptocurrencies.
However, on July 12, the U.S. Dollar Index hit its lowest level in 14 months. This indicates a waning confidence in the Federal Reserve’s ability to prevent a recession. Wharton professor Jeremy Siegel suggests that the U.S. economy is progressing smoothly, despite higher borrowing costs. Consumers seem unaffected and are spending their cash reserves on travel and summer activities.
The approval of a spot ETF remains the most significant argument for bullish support and maintaining Bitcoin’s trading price above $31,000 on July 14. Unfortunately, recent statements by Gary Gensler, the chair of the U.S. Securities and Exchange Commission (SEC), have not been favorable. Gensler pointed out the conflicting services offered by crypto exchanges and highlighted concerns about limited risk monitoring practices.
Over the years, the SEC has rejected multiple requests for spot Bitcoin ETFs due to significant pricing issues occurring on unregulated trading platforms. Fraudulent and manipulative acts also pose a risk. These remarks cast doubt on the likelihood of ETF approval, decreasing the odds for further bullish gains.
Bitcoin’s price previously traded above $31,000 on July 4, leading to bullish bets by traders using options contracts. However, another failed attempt to break resistance on July 6 resulted in concentrated bets on prices trading above $31,000. Bearish instruments were outnumbered, but better positioned.
The 0.53 put-to-call ratio indicates the difference in open interest between the $470 million call (buy) options and the $250 million put (sell) options. However, the actual outcome will be lower than the total open interest of $720 million due to excessive bullish confidence.
There are four most likely scenarios based on current price action, depending on the expiration price and the number of options contracts available for call and put instruments. Between $28,000 and $30,000, the net result favors the put instruments by $120 million, while between $30,000 and $31,000, the net result is balanced between the call and put instruments. Between $31,000 and $32,000, the net result favors the call instruments by $125 million, and between $32,000 and $33,000, the net result favors the call instruments by $210 million.
Considering the latest macroeconomic data supporting more interest rate hikes and Gensler’s negative comments about exchanges’ ability to support a spot Bitcoin ETF approval, bears have an opportunity to break below the $30,000 price support and secure a $120 million profit during the upcoming weekly options expiry.
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