The upcoming monthly options expiry for Bitcoin (BTC) on July 28, which is expected to be worth $2 billion, could potentially establish $29,500 as a support level. Some believe that the recent increase in the United States Federal Reserve interest rate to 5.25% had a negative impact on risk-on assets like cryptocurrencies. However, Bitcoin bulls argue that it takes time for the full impact of a tighter economic policy to influence the markets.
Analyzing previous monthly expiries, it can be observed that the expiry on June 30 did not cause significant volatility as Bitcoin had already experienced a 22.2% gain between June 15 and June 23. In contrast, the May expiry triggered a 9% rally, with Bitcoin’s price rising from $26,100 on May 25 to $28,450 on May 29. On the other hand, the options expiry in April resulted in a 7% correction, with Bitcoin’s price dropping from $29,900 on April 27 to $27,800 on May 1. These examples clearly demonstrate that the impact of the options expiry takes a few days to consolidate but eventually becomes highly relevant in setting trends.
Bitcoin bulls currently have regulatory and ETF momentum on their side. Several spot Bitcoin ETF requests from major fund managers, including BlackRock and Fidelity, have been submitted. Additionally, on July 26, a U.S. House committee approved bills aiming to clarify the distinctions between securities instruments and digital commodities, which further supports the bullish momentum. Positive corporate earnings reported by various companies, such as Meta Platforms, McDonald’s, Coca-Cola, Google, Johnson & Johnson, Morgan Stanley, and Novartis, also contribute to the bullish sentiment. Furthermore, the U.S. Consumer Confidence Index reached its highest level in two years, indicating a diminishing risk of recession in the short term.
However, data shows that Bitcoin bulls may have been excessively optimistic about the price, with a put-to-call ratio of 0.56 reflecting an imbalance between the $1.3 billion in call (buy) open interest and the $740 million in put (sell) options. If Bitcoin’s price remains close to $29,500 at the expiry time, only $137 million of the call options will be available. This discrepancy occurs because the right to buy Bitcoin at higher levels becomes worthless if the price is below those levels at expiry.
Considering the current price action, several scenarios can be envisioned based on the number of options contracts available for call and put instruments on July 28:
1. Between $27,000 and $28,000: 1,100 calls vs. 10,000 puts. Put instruments have a net advantage of $240 million.
2. Between $28,000 and $29,000: 3,000 calls vs. 6,800 puts. Put instruments have a net advantage of $110 million.
3. Between $29,000 and $31,000: 6,500 calls vs. 6,600 puts. The result is balanced between put and call options.
4. Between $31,000 and $32,000: 15,400 calls vs. 3,800 puts. Call instruments have a net advantage of $360 million.
Although the bears have the potential to secure a profit with a modest 2% correction below $29,000, the estimated profit of $110 million may not justify their efforts. Moreover, based on recent price trends, it is likely that the expiry will result in a neutral area near $30,000.
Looking at a broader mid-to-long-term scenario, Bitcoin bears may have the upper hand due to the incentives of higher fixed-income returns resulting from reduced inflation and increased interest rates. However, considering the overall bullish momentum in the economy, there is a favorable outlook for Bitcoin to break above $31,000 in the following weeks.
It is important to note that this article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely the author’s and do not necessarily reflect those of Cointelegraph.
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