All eyes on the $40k Bitcoin price ending on Friday’s $4.5B BTC options.
Bitcoin (BTC) price traded below $40,000 support for the first time in 50 days on January 18, and the upcoming $4.5 billion BTC monthly options settlement ending on January 26 may hold the key to whether the downtrend continues. Incredibly, the US stock market reached its all-time high on January 22nd, indicating that any Bitcoin performance is unlikely to be related to macroeconomic conditions.
The GBTC ETF has been bullish
Some analysts argue that most of the selling pressure will come from grayscale GBTC. Since 2015, investors in the form of trust funds have not been able to claim redemptions in the past.
Wild Sight Grayscale randomly drops 10,000-25,000 BTC every day.
It could be the biggest blown lead in #Bitcoin history, and not all are willing to lower fees. pic.twitter.com/JujTljpPtg
— Alan ₿ Watts ⚡️ (@alanbwt) January 21, 2024
Bitcoin influencer @alanbwt described the situation on the X social network as “the biggest blown leader in the history of Bitcoin.” When Grayscale GBTC entered on January 11 with a capitalization of $27 billion, there were Fidelity, BlackRock, Bitwise and the rest of the competitors. Start from scratch. However, Greyscale opted for a 1.5% annual management fee—much higher than the incumbent—increasing selling pressure on GBTC shares.
Since the beginning of spot ETF trading on Jan. 12, Bitcoin's fall is 4.12 percent lower than the U.S. 2-year Treasury yield. From there, investors did not seek protection for fixed income as the yield has now risen to 4.39%, indicating a reversal of the 3-month movement. According to Yahoo Finance, the most likely explanation is recent economic indicators that suggest the “Federal Reserve may not be moving as far as previously expected.”
The answer to whether the Fed will start cutting interest rates in the next two months will depend on fourth-quarter gross domestic product data on January 25 and the personal consumption expenditures index on inflation on January 26. For bitcoin investors, the higher interest rates, the less incentive investors have to seek exposure to commodities — as opposed to stocks, for example, which tend to pay dividends.
Basically, Bitcoin investor bulls will have to wait until 8:00 am UTC to conclude their billion-dollar call (buy) options based on waiting for a price rally after the spot ETF's approval.
The data shows that bulls were overly optimistic about the spot's EFF approval.
Open interest on options ending on January 26 is at $4.5 billion, but the final amount will be much lower as traders see the price level at or above $42,000. The unexpected 15% Bitcoin price correction from January 11 to January 22 caught bullish investors off guard, as evident from the Deribit Bitcoin Options interest rate chart.
Deribit's call ratio of 0.55 BTC shows a mismatch between $2.42 billion in call (buy) open interest and $1.32 billion in put (sell) options. CME Bitcoin options offered a similar ratio to a total open interest of $650 million, while the OKX exchange posted a more balanced relationship between calls and put options for a total exposure of $290 million. Finally, Bybit and Binance held open interest of $290 million for January 26 BTC options expiring.
Related: Bitcoin Price Drops to 6-Week Below $40K — What's Next for BTC?
To put things in perspective, if the price of Bitcoin was trading at $39,900 at the end of the month in January, these call options would only be worth $55 million. This difference occurs because the right to buy BTC at $40,000 or $42,000 is worthless if BTC trades below this level for a period of time. Meanwhile, $40,000 or more options to $270 million; Therefore, the BTC January 26 options may provide a great opportunity for the bears to exert short-term pressure.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
