Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
A massive $13.8 billion Bitcoin options expiry on August 29 is poised to be a pivotal moment for the cryptocurrency market, determining if the recent 9.7% price correction signifies the end of the current bull run or merely a temporary pause. The expiry, dominated by Deribit with an 85% market share, comes amidst intensifying bearish momentum following Bitcoin’s drop to a six-week low of $112,100.
Options Market Dynamics Favor Bears
Initial optimism among Bitcoin bulls, reflected in a higher open interest for call options totaling $7.44 billion compared to $6.37 billion in put contracts, has significantly eroded. Many bullish wagers, particularly those set at or above $125,000, are now out-of-the-money, shifting momentum towards bearish put instruments.
Only 12% of call options are positioned at or below $115,000, contrasting sharply with 21% of put options concentrated at or above $115,000, with notable clusters around $112,000. This configuration naturally incentivizes bears to exert downward pressure on Bitcoin’s price in the lead-up to the monthly expiry.
Macroeconomic Factors and Tech Sector Influence
The outcome of the options expiry is not solely dependent on options positioning; broader macroeconomic factors are also at play. Traders are keenly awaiting comments from US Federal Reserve Chair Jerome Powell on Friday, hoping for any indication of increased odds for rate cuts, which could provide support for asset prices.
This anticipation is heightened by recent hotter-than-expected US jobless claims data, contributing to a climate of high macroeconomic uncertainty. Furthermore, concerns within the artificial intelligence sector, amplified by Morgan Stanley’s warning about soaring spending impacting tech firms’ share buybacks, are adding caution to equity markets, which can influence Bitcoin.
Probable Scenarios at Expiry
Based on current price trends, analysts have outlined several probable scenarios for Deribit, estimating theoretical profits based on open interest imbalances:
Price Between $105,000 and $110,000
In this range, call options would amount to $210 million versus $2.66 billion in puts, indicating a significant advantage for bears.
Price Between $110,100 and $114,000
Here, $420 million in calls would be pitted against $1.94 billion in puts, maintaining strong bearish control.
Price Between $114,100 and $116,000
Should Bitcoin land in this range, $795 million in calls would face $1.15 billion in puts, still favoring bears but with reduced dominance.
Price Between $116,100 and $118,000
At these levels, bulls would begin to gain traction, with $1.3 billion in calls against $830 million in puts.
Price Between $118,100 and $120,000
This scenario heavily favors bulls, showing $1.7 billion in calls versus $560 million in puts.
For bullish strategies to gain significant traction, Bitcoin would need to trade above $116,000 by August 29. However, the most critical battle for price direction remains at $114,000, where bears are most incentivized to push prices lower.
The $13.8 billion Bitcoin options expiry on August 29 will serve as a critical barometer for the cryptocurrency’s immediate future. The interplay between options positioning, US Federal Reserve policy signals, and broader tech sector sentiment will ultimately dictate whether Bitcoin can regain its upward trajectory or if the bearish pressure will persist.
