What Impact Will the $4.7B Expiry Have on BTC Price?

3:31 pm
June 29, 2023
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As the $4.7 billion Bitcoin (BTC) monthly options expiry on June 30 approaches, its outcome could significantly influence the future trajectory of the cryptocurrency. This expiration could determine whether the $30,000 price level will solidify as long-term support, potentially paving the way for further bullish momentum.

Reasons Behind Bitcoin’s Recent Breakout

Bitcoin’s recent surge above $27,000 is largely attributed to expectations surrounding the approval of multiple spot Bitcoin exchange-traded fund (ETF) applications. Notably, applications from companies like BlackRock and ARK Invest have sparked optimism in the market. Additionally, there is anticipation that Grayscale’s Grayscale Bitcoin Trust (GBTC) could convert to a Bitcoin ETF.

Factors Limiting Bitcoin Price Gains

While bullish sentiment prevails, there are still several factors that could hamper Bitcoin’s upward movement. One such factor is the implementation of mandatory Know Your Customer (KYC) procedures by exchanges, which could pose regulatory challenges. Following this trend, KuCoin recently announced an upcoming KYC system upgrade to comply with global Anti-Money Laundering regulations.

Concerns also arise from miners’ increased sell pressure. The network hashrate has reached an all-time high of 400 exahashes per second, leading to miners sending a record-high BTC revenue percentage to exchanges. This trend mirrors patterns observed during the 2021 bull run, indicating miners are capitalizing on profits.

Additionally, during the European Central Bank forum, Federal Reserve (Fed) Chair Jerome Powell announced the likelihood of two more interest rate hikes this year. This announcement has caused investors to anticipate a 25 basis point interest rate increase on July 26.

Overall, these factors contribute to a scenario of sideways trading and caution among Bitcoin traders.

Implications of the $4.7 Billion Expiry

The open interest for the June 30 options expiry is $4.7 billion. However, it is expected that the actual figure will be lower since bulls were anticipating price levels of $32,000 or higher. This optimism arose from Bitcoin’s recent rally and its testing of the $31,000 resistance.

The put-to-call ratio of 0.56 highlights the prominence of call (buy) open interest, which is valued at $3.1 million. In contrast, put (sell) options only amount to $1.7 million.

If Bitcoin’s price remains close to $30,500 by 8:00 am UTC on June 30, only $630 million worth of call (buy) options will be available. This disparity occurs because the right to buy Bitcoin at $31,000 or $32,000 becomes worthless if BTC trades below those levels on expiry.

Potential Scenarios

Based on current price action, there are four likely scenarios for the expiry:

  • Between $28,000 and $29,000: Bears in control with 7,200 calls vs. 16,200 puts, potentially profiting $250 million.
  • Between $29,000 and $30,000: Balanced result with 13,000 calls vs. 12,600 puts.
  • Between $30,000 and $31,000: Call options slightly favored with 1,500 calls vs. 2,100 puts, potentially profiting $440 million.
  • Between $31,000 and $32,000: Call options strongly favored with 3,300 calls vs. 800 puts, potentially profiting $670 million.

These scenarios provide a simplified analysis that disregards more complex investment strategies, which could impact the overall outcome.

The Road Ahead

Ultimately, the outcome of the expiry will largely depend on the risk appetite of Bitcoin bears as the potential approval of a spot Bitcoin ETF by the SEC looms. While the timing and magnitude of such an event are uncertain, it could pave the way for bulls to secure a $440 million profit by maintaining Bitcoin’s price above $30,000 in the short term.

FAQs

What is the significance of the options expiry on Bitcoin’s price?

The options expiry is a key event that can influence the future direction of Bitcoin’s price. It can indicate whether a certain price level will become a long-term support or resistance for the cryptocurrency.

Why did Bitcoin recently break yearly highs?

The recent breakout in Bitcoin’s price is attributed to expectations surrounding the approval of spot Bitcoin exchange-traded funds (ETFs), as well as the potential conversion of Grayscale’s Grayscale Bitcoin Trust (GBTC) to a Bitcoin ETF.

What factors could limit Bitcoin’s price gains?

Bitcoin’s price gains could be limited by macroeconomic and regulatory headwinds, such as the implementation of mandatory Know Your Customer (KYC) procedures by exchanges. There are also concerns over increased sell pressure from miners and the possibility of interest rate hikes.

What are the potential scenarios for the options expiry?

Based on the current price action, there are four potential scenarios for the options expiry, depending on the price range at expiry. These scenarios involve different levels of call and put options, which can impact the overall outcome of the expiry.

What impact could a spot Bitcoin ETF approval have on Bitcoin’s price?

The potential approval of a spot Bitcoin ETF by the SEC could have a positive impact on Bitcoin’s price. It could lead to increased investor interest and potentially pave the way for further price appreciation in the cryptocurrency.


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