This week’s Bitcoin (BTC) options are set to expire on Friday, July 21, which could consolidate resistance at $30,000 and give bears the upper hand for the first time since a 21% rally between June 14 and June 21.
Bitcoin options expiration coincides with volatility
A review of bitcoin’s recent price action shows that three of the past four bitcoin option expirations have triggered significant price swings, making it crucial for traders to keep tabs on these events.
Notably, the price of Bitcoin has been showing a strong reaction following the weekly 8:00 AM UTC options expiration. While causality cannot be established, the magnitude of these price swings warrants extreme caution ahead of the weekly expiration on July 21st.
Bitcoin bears benefit from tighter regulation
While this week’s option expiration could give bears some control over bitcoin’s price in the short-term, bulls have a potential advantage in the SEC’s review of a spot ETF proposal.
While the proposals are still in the early stages of regulatory scrutiny, the slow pace could partly explain why bears have successfully defended $31,000 several times since late June.
However, their best chance of keeping the price of Bitcoin below $30,000 lies in a deteriorating regulatory environment. On July 19, global stock exchange Nasdaq suspended the launch of its cryptocurrency custody solution due to regulatory uncertainty in the United States. Nasdaq Chief Executive Adena Friedman (Adena Friedman) thinks this plan change is justified.
related: Bipartisan Bill to Regulate DeFi and Cryptocurrency Security Risks Heads to US Senate
Additionally, on July 14, cryptocurrency exchange Coinbase announced the suspension of staking services for clients in California, New Jersey, South Carolina, and Wisconsin. The decision follows a June 6 SEC lawsuit alleging that the exchange has been operating as an unregistered securities broker since 2019.
Excessive Optimism by Bitcoin Bulls Leads to Disappointing Results
Bitcoin prices briefly topped $31,000 on July 13 and July 14, spurring bullish bets by traders using options contracts. However, a four-hour correction brought the price back down to $30,000.
The put-to-call ratio of 0.39 reflects the difference in open interest between $430 million in calls (buys) and $170 million in puts (sells). However, the result will be below the $600 million total open interest as bulls get overconfident.
For example, if the price of Bitcoin is $30,500 at 8:00 AM UTC on July 14th, only $18 million worth of call options are considered. This distinction stems from the fact that the right to buy Bitcoin for $31,000 or $32,000 would lapse if BTC traded below these levels at expiration.
Below are the three most likely scenarios based on current price action. The number of July 21 options contracts available for call (buy) and put (sell) instruments varies based on the expiration price. An imbalance in favor of both parties constitutes a theoretical profit:
- Between $28,000 and $30,000: 100 calls and 2,400 puts. The final result was in favor of a bearish (sell) instrument of $70 million.
- Between $30,000 and $31,000: 600 calls and 1,800 puts. The final result was in favor of a bearish (sell) instrument of $35 million.
- Between $31,000 and $32,000: 3,100 calls and 1,400 puts. The end result was in favor of a call (buy) instrument of $55 million.
Considering the recent weak macroeconomic indicators, it is likely that the bears will continue to suppress the price of Bitcoin until Friday’s expiry. In addition, China’s second-quarter GDP grew by 6.3% year-on-year, below market expectations of 7.3%. Meanwhile, US retail sales rose 0.2% MoM in June, below market expectations of 0.50%.
Thus, bulls find themselves in a challenging position as their bullish (buy) instruments will be invalidated if Bitcoin’s expiry price falls below $30,000. So, a favorable outcome for the bears at $35 million may not be a major win, but it does increase the chances of $30,000 becoming a new resistance area.
This article is for general informational purposes only and is not intended and should not be construed as legal or investment advice. The views, ideas and opinions expressed here are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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