Bitcoin Holds $19,000 Level, But Volatility Expected Due to Expiration of $2.2 Billion in BTC Options

Traders expect increased volatility due to the possibility that the September $2.2B options expiry will put pressure on the BTC price near a critical support level. This week the $20,000 resistance is proving to be stronger than expected and even after Bitcoin price rejected this level on Sep 27, BTC bulls still have reason not to give up.

Based on the 4-month-long descending triangle, as long as support at $18,500 holds, Bitcoin price has until the end of October to determine if the downtrend will continue. Bitcoin bulls might be disappointed by the lackluster price performance as BTC has failed to break above the $20,000 mark several times, but macro events could trigger an earlier-than-expected rally.

Some analysts point to the UK’s unexpected intervention in the bond market as the breaking point in the credibility of government debt. On September 28, the Bank of England announced that it would start temporary buying of long-term bonds to calm investors after a sharp rise in yields, the highest since 1957.

To justify the intervention, the Bank of England declared that “if the dysfunction in this market were to continue or worsen, there would be a material risk to the financial stability of the United Kingdom”. Taking this action is diametrically opposed to the promise to sell USD 85,000 million in bonds within 12 months. In short, the government’s credibility is being called into question and as a result, investors are demanding much higher yields to hold UK debt.

The impact of the government’s efforts to curb inflation is starting to hurt business revenues, and according to Bloomberg, Apple recently backed off plans to ramp up production on September 27. Amazon, the world’s largest retailer, is also estimated to have canceled plans to open 42 facilities, according to MWPVL International Inc.

As such, the $2.2B Bitcoin (BTC) monthly options expiry on September 30 will put a lot of price pressure on the bulls, although the bears appear to be slightly better positioned as Bitcoin attempts to hold onto the lows. $19,000.

Most of the bullish bets were placed above $21,000

Bitcoin’s rally towards the $22,500 resistance on Sept. 12 gave the bulls a signal to expect a continuation of the positive trend. This is evident because only 15% of the call options for September 30 have been placed at USD 21,000 or less. This means that Bitcoin bears are better positioned for the expiry of the $2.2B monthly options.

A broader view using the 1.49 ratio between calls and puts shows a skewed situation, with $1.26bn open interest on calls vs. $850m on puts. Nonetheless, with Bitcoin currently hovering near $19,000, the bears have a dominant position.

If the price of Bitcoin stays below $20,000 at 8:00 a.m. UTC on September 30, only $37 million of these call options will be available. This difference occurs because there is no use having the right to buy Bitcoin at $20,000 or $21,000 if it trades below that level at expiration.

The bears could pocket a profit of USD 350 million

Below are the four most likely scenarios based on the current price action. The number of option contracts available on September 30 for call (bullish) and put (bearish) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

• Between $18,000 and $19,000: 500 call options vs. 19,800 put options. The net result favors the bears by $350 million.

• Between $19,000 and $20,000: 2,000 call options vs. 16,000 put options. The net result favors the bears at $270 million.

• Between $20,000 and $21,000: 5,900 call options vs. 12,700 put options. The net result favors the bears at $135 million.

• Between $21,000 and $22,000: 10,100 call options vs. 11,300 put options. The net result is balanced between bulls and bears.                              

This gross estimate considers call options used on bull bets and put options exclusively on neutral or bear trades. Even so, this oversimplification does not take into account more complex investment strategies.

Regulatory Pressure Could Complicate Things for Bitcoin Bulls

Bitcoin bulls need to push the price above $21,000 on Sept. 30 to balance the scales and avoid a possible $350 million loss. However, Bitcoin bears appear to be out of luck as the US Federal Reserve chairman called for regulation of “crypto activities” on Sept. 27, warning of “very significant structural issues around lack of transparency.” .

If the bears dominate the September monthly options expiry, that is likely to add potency for further downside bets for Bitcoin price. But, at the moment, there are no signs that the bulls can turn the situation around and avoid the pressure of the descending triangle that has been in play for 4 months.


Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.

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