As the expiration date of the second-largest monthly Bitcoin options approaches in 2024, the total open interest in the market has reached $8.1 billion, drawing significant attention from industry insiders. Analysts are closely monitoring whether this options expiration will be sufficient to push Bitcoin's price to $70,000 or if bearish sentiment will continue to dominate.
The current macroeconomic environment presents a favorable outlook for risk assets, including Bitcoin. The options expiration on September 27 is seen as a key turning point for the market. If Bitcoin's price can hold above $63,000, neutral to bullish options holders will find themselves in a favorable position. However, short sellers also have strong incentives to drive Bitcoin's price below $60,000 to suppress this bullish trend. Therefore, analyzing the options market's positioning and the potential net impact of monthly expirations is particularly important.
Lessons from Historical Events
Looking back, Bitcoin has experienced significant volatility during similar options expirations. For instance, during the June 2021 options expiration, Bitcoin's price fluctuated dramatically due to the tug-of-war between bulls and bears, ultimately rebounding shortly after the expiration. These events are often accompanied by shifts in market sentiment, leading to rapid price corrections or rebounds. Historical data shows that when the market faces large-scale options expirations, there tends to be short-term price volatility, requiring investors to proceed with caution.
Stimulus Policies from the People's Bank of China Boost the Market
Against this backdrop, the People's Bank of China (PBOC) announced a series of measures on September 24 to reduce borrowing costs and inject liquidity into the economy. These initiatives include a reduction in mortgage repayment plans, which directly spurred a rise in the Chinese stock market. Simultaneously, the PBOC has committed to injecting $113.8 billion in support for the stock market, covering stock purchases and repurchase plans. Lynn Song, ING's Chief Economist for Greater China, stated, "There is still room for further easing in the coming months."
Central banks around the world are diminishing the appeal of fixed-income investments through economic stimulus and interest rate reductions while exacerbating inflationary pressures. In such an environment, scarce assets like Bitcoin often perform well. Data shows that when the S&P 500 index is less than 1% away from its recent historical peak, home prices in the 20 largest U.S. metropolitan areas, based on the Case-Shiller Index, have increased by 5.9% over the past 12 months.
What is the Key to a Breakthrough?
Analysts point out that the key to breaking through $70,000 lies in market sentiment, the macroeconomic environment, and trading strategies in the options market. If Bitcoin's price can maintain above $63,000 and attract more buying pressure during the options expiration on September 27, it will create favorable conditions for a breakthrough to $70,000. Furthermore, if central banks continue to implement easing policies to stimulate economic growth, this will also enhance demand for digital assets like Bitcoin.
Bulls Have Reason to Stay Optimistic
Given these favorable macroeconomic conditions, Bitcoin bulls remain optimistic about the support at $63,000 and expect the price to rise to $65,000 by the options expiration on September 27. However, evaluating the feasibility of this bullish momentum requires a deep analysis of the positions of options traders.
As of now, the open interest in Bitcoin call (buy) options worth $4.9 billion exceeds that of put (sell) options at $3.2 billion by 53%. Although cryptocurrency traders typically lean bullish, the excessive optimism regarding Bitcoin prices of $90,000 and above ahead of the impending options expiration appears particularly unrealistic.
In fact, 55% of call options have exercise prices of $70,000 or higher, meaning that a nominal value of $22.2 billion may come into effect in the September monthly expiration. Meanwhile, 69% of put options have exercise prices of $56,000 or lower, making it likely that they will expire worthless, reducing the outstanding nominal value to about $1 billion.
Who Are the Bears?
In the current market environment, the bears mainly consist of large hedge funds, institutional investors, and some professional traders in the exchange market. These short sellers often employ strategies that leverage the volatility and uncertainty of the options market, hedging risks or seeking profits by selling put options. Especially when Bitcoin's price approaches key psychological levels, short sellers strengthen their defenses, attempting to protect their portfolios by driving prices lower. Additionally, short-term traders may also exploit this period for arbitrage opportunities.
Price Ranges Investors Should Focus On
In the upcoming options expiration, the advantages of Bitcoin call (buy) options are evident. Based on current price trends, analysts believe the following scenarios may arise:
- $57,000 to $58,000: The net result favors put (sell) options, amounting to $250 million.
- $58,000 to $60,000: The net result is expected to be roughly balanced between call and put options.
- $60,000 to $62,000: The net result favors call (buy) options, amounting to $550 million.
- $62,000 to $64,000: The net result favors call (buy) options, amounting to $1 billion.
The pressure facing the bears should not be underestimated, as they need to push Bitcoin's price below $60,000 before the September monthly expiration to avoid a scenario where call options profit by $550 million. However, given the current macroeconomic environment, including the Fed's interest rate cuts and the PBOC's stimulus measures, Bitcoin bulls seem to hold an advantage in this round of trading. As September 27 approaches, how the market reacts will be of great interest to investors.
Relevant Knowledge Q&A
What is the impact of Bitcoin options expiration on price?
Bitcoin options expiration typically triggers price volatility. At expiration, holders will decide whether to exercise their options based on the current market price, which may lead to increased buying and selling pressure, affecting Bitcoin's market price.
What are call options and put options?
Call options give the holder the right to buy an asset at a specific price within a specified timeframe, typically used when the market expects a price increase. Put options give the holder the right to sell an asset at a specific price within a specified timeframe, typically used when the market expects a price decrease.
How do macroeconomic factors affect the Bitcoin market?
Macroeconomic factors such as interest rate changes, monetary policy, inflation, and economic growth expectations directly impact investors' demand for risk assets like Bitcoin. For example, a rate cut may increase Bitcoin's appeal as its scarcity becomes more recognized in an inflationary environment.
What are the key support and resistance levels for Bitcoin right now?
The current key support level is at $63,000. If Bitcoin's price remains above this level, it may attract more buying. The resistance level is at $70,000, and breaking through this price may trigger further increases.
What strategies should investors focus on when trading Bitcoin options?
Investors should focus on several strategies when trading Bitcoin options: utilizing call options for bullish trades, using put options for bearish protection, and combining long and short options for hedging. These strategies can help investors better manage risk in a volatile market.
