The July 14 Bitcoin weekly options expiration could be a defining moment for the market’s attitude, potentially causing the key $30,000 aid line to be broken.
When the news of the Bitcoin ETF request initially caused a bullish surge, recent macroeconomic reports have not been conducive to any sort of risk-on assets.
It is essential to evaluate market sentiment in determining whether or not Bitcoin (BTC) can remain above $30,000 until July 14. This level stands as a possible gateway for bears to gain $120 million through the upcoming weekly option expiry.
In June, the Consumer Price Index in the U.S. was recorded at 3.0%, the least it has been since March 2021. This was mainly because of a 16.7% dip in the energy index. Though this suggests a reduction in inflation, it remains higher than the Federal Reserve’s goal of 2%, which does not bode well for Bitcoin as higher interest rates encourage investors to move into fixed-income investments.
It could be argued that the Federal Reserve’s interventions have successfully caused a decrease in inflation, and this could be seen as beneficial to Bitcoin’s bullish momentum. That being said, on July 12th, the U.S. Dollar Index, which tracks the dollar’s strength relative to other currencies, reached its lowest level in over a year.
Investors appear to be less sure of the Federal Reserve’s capability of averting a recession. Jeremy Siegel, a professor at the Wharton School, said the U.S. economy is “progressing satisfactorily,” and that people’s spending is not affected by greater borrowing. Though, in his opinion, consumers are likely using up their savings for summer holidays.
Bulls may be inclined to keep Bitcoin’s trading price elevated at more than $31,000 on July 14 due to the prospect of a spot ETF being accepted. Nonetheless, Gary Gensler, the chairperson of the SEC, has recently made some negative statements.
On July 12, Gensler pointed out that digital currency exchanges frequently provide conflicting services, like trading with their own customers. He also sounded a warning about the inadequate risk tracking procedures employed by crypto exchanges, making them susceptible to illegal trading activities such as wash trading.
The Securities and Exchange Commission has been unwilling to accept any applications for spot Bitcoin ETFs over the years, citing the potential for significant pricing discrepancies on unregulated trading platforms. In addition, they have expressed their apprehension in regards to the ability of ETF providers to keep investors from being exposed to any fraudulent or manipulative activity.
On July 4, traders who use options contracts were making bullish bets as Bitcoin’s price soared beyond $31,000. However, the resistance remained firm on the 6th of July, which explains why traders are focusing their bets on Bitcoin prices trading above $31,000.
The ratio of 0.53 between call and put options indicates the disparity in open interest numbers, with $470 million for calls (buying) and $250 million for puts (selling). The final outcome will be less than the combined $720 million open interest, due to the overconfidence of the bulls.
Take, for instance, the case of Bitcoin trading for $30,500 at 8:00 am UTC on July 14. In such circumstances, only $30 million in call options will be taken into consideration. This is because the right to buy Bitcoin at $31,000 or $32,000 will become null and void if BTC dips below those prices at the time of expiry.
As of July 14, four potential scenarios can be identified based on the current price action. The amount of call and put options contracts available varies in relation to the expiration price, with the discrepancy creating a potential theoretical profit.
Given the present macroeconomic information that implies more rate increases and Gensler’s pessimistic remarks about exchanges’ capability of providing a spot Bitcoin ETF approval, bears have a chance to breach the $30,000 cost support and grab a $120 million gain during the upcoming weekly options expiry.
This piece is meant only to provide general knowledge and is not to be regarded as legal or investment advice. The ideas and opinions conveyed here are the exclusive ideas of the author, and not those of Cointelegraph.
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