The upcoming expiration of $3 billion in Bitcoin (BTC) monthly options on September 29th could have a significant impact on the support level of $26,000. This pivotal moment comes as Bitcoin faces both positive and negative factors in the market.
On the positive side, there has been an increase in recognition of Bitcoin in China. A recent judicial report from a Shanghai Court acknowledged digital currencies as unique and non-replicable. This recognition adds legitimacy to Bitcoin in the Chinese market.
However, Bitcoin’s spot exchange trading volumes have reached a five-year low, according to on-chain analytics firm CryptoQuant. This decline is attributed to growing fear among traders about the macroeconomic outlook. The reduced trading volume poses a risk in terms of unexpected volatility, especially if there aren’t enough active participants in the market.
Traditional financial institutions are also expressing unease about handling crypto-related payments. JPMorgan Chase, the largest bank in North America, is reportedly prohibiting transfers related to crypto assets within its retail division, Chase. The bank aims to protect against potential involvement in fraudulent or scam activities.
Furthermore, Bitcoin holders are feeling apprehensive as the Dollar Strength Index (DXY) reached its highest level in 10 months on September 26th. This index typically rises when investors seek safety in cash positions, indicating a potential inverse correlation with risk-on assets like Bitcoin.
Despite these headwinds, there is optimism among Bitcoin bulls. The open interest for the September 29th options expiration currently stands at $3 billion. However, it is expected that the final amount will be lower due to bullish expectations of Bitcoin’s price reaching $27,000 or higher.
The imbalance between buy (call) and sell (put) options reflects the market sentiment. Currently, there is $1.9 billion in call options and $1.1 billion in put options. If Bitcoin’s price remains near $26,300 at the expiration date, only $120 million worth of call options will be available.
Based on the current price action, four likely scenarios can be identified. In the $25,000 to $26,000 range, the net result favors put options by $430 million. In the $26,000 to $27,000 range, the net result favors put options by $170 million. In the $27,000 to $27,500 range, the net result is balanced between call and put options. And in the $27,500 to $28,000 range, the net result favors call options by $85 million.
To level the playing field, Bitcoin bulls need a 3.2% price increase from $26,200, while bears only need a modest 1% correction below $26,000 to gain a $430 million advantage.
Given Bitcoin’s past trading below the $26,000 support level and the increasing risk-aversion sentiment in the market, there is a high likelihood of breaking below $26,000 by September 29th unless significant news or events favor the bulls.
It is important to note that this article provides general information and should not be considered legal or investment advice. The views expressed are solely those of the author and do not necessarily reflect the opinions of Cointelegraph.