Bitcoin Investors Brace for Major Options Expiry
Investors in Bitcoin (BTC) are gearing up for a significant monthly options expiry totaling $16.5 billion on March 28. However, the anticipated impact on the market is likely to be limited, especially after Bitcoin’s unexpected decline below the $90,000 mark, which caught many investors off guard and undermined numerous bullish positions. This shift presents a vital opportunity for Bitcoin bears to mitigate a potential loss of $3 billion, a factor that could play a crucial role in the market’s dynamics in the upcoming weeks.
Options Market Overview
At present, the aggregate open interest for call options, which allow investors to buy, is recorded at $10.5 billion, whereas the open interest for put options, which enable selling, trails at $6 billion. Notably, $7.6 billion of the call options are set at $92,000 or above, indicating that Bitcoin would need to experience a 6.4% uptick from its current value to become viable by the expiry date. Consequently, the prospect for bullish positions has considerably diminished.
Market Sentiment Amid Economic Concerns
Some market analysts attribute Bitcoin’s sluggish performance to the ongoing global trade disputes and recent spending cuts by the U.S. government, which heighten the chances of an economic downturn. Traders express concerns regarding slower growth, particularly in the artificial intelligence sector, which had propelled the S&P 500 to a record high on February 19 before experiencing a 7% decline.
Hopes for Decoupling from Traditional Markets
Despite the ongoing correlation with the stock market, Bitcoin bulls remain optimistic about a potential decoupling. This optimism persists even as the 40-day correlation has remained above 70% since early March. Their hope is buoyed by the expansion of the monetary base by central banks and the increased adoption of Bitcoin by companies such as GameStop (GME), Rumble (RUM), Metaplanet (TYO:3350), and Semler Scientific (SMLR).
Strategic Positions Ahead of Options Expiry
As the expiry date approaches, both bulls and bears are motivated to influence Bitcoin’s spot price actively. While bullish investors are aiming for prices above $92,000, their collective optimism may not be sufficient to propel BTC past this threshold. Currently, Deribit dominates the options market with a 74% share, followed by the Chicago Mercantile Exchange (CME) at 8.5% and Binance at 8%.
Scenarios for Potential Price Movements
In light of the existing market conditions, Bitcoin bulls appear to have a strategic advantage leading up to the monthly options expiry. For example, if Bitcoin holds steady at $86,500 by 8:00 AM UTC on March 28, only $2 billion in put options would be in play. This scenario could incentivize bears to push Bitcoin below $84,000, thereby increasing the value of active put options to $2.6 billion.
Projected Outcomes Based on Price Trends
The following outlines five possible scenarios based on current price behaviors, estimating potential profits derived from open interest discrepancies while excluding more complex strategies like selling put options for upward price exposure.
– Between $81,000 and $85,000: $2.7 billion in calls versus $2.6 billion in puts, favoring calls by $100 million.
– Between $85,000 and $88,000: $3.3 billion in calls versus $2 billion in puts, favoring calls by $1.3 billion.
– Between $88,000 and $90,000: $3.4 billion in calls versus $1.8 billion in puts, favoring calls by $1.6 billion.
– Between $90,000 and $92,000: $4.4 billion in calls versus $1.4 billion in puts, favoring calls by $3 billion.
To minimize potential losses, bears need to drive Bitcoin below $84,000, which represents a 3% decline, before the March 28 expiry. Such a move would enhance the value of put options, thereby strengthening their position. On the other hand, bulls could maximize their gains by pushing BTC above $90,000, potentially generating enough momentum to initiate a bullish trend for April, particularly if there is a resurgence in inflows into spot Bitcoin exchange-traded funds (ETFs).
This article is meant for general informational purposes and should not be construed as legal or investment advice. The opinions expressed herein are those of the author alone and do not necessarily reflect the views of Cointelegraph.
