Bitcoin traders are focused on the $31K price target despite the expiry of $2B worth of BTC options on Friday.

Bitcoin traders are focused on the $31K price target despite the expiry of $2B worth of BTC options on Friday.

The Potential Impact of the $2 Billion Bitcoin Monthly Options Expiry

The upcoming $2 billion Bitcoin (BTC) monthly options expiry on July 28 has the potential to establish $29,500 as a support level for the cryptocurrency. This expiry is significant because it can have an impact on Bitcoin’s price movement and set trends in the market.

Historically, options expiry events have shown that the full impact takes time to consolidate but eventually becomes highly relevant. For example, in June, the monthly expiry did not cause significant volatility as Bitcoin had already experienced a 22.2% gain between June 15 and June 23. In May, the expiry triggered a 9% rally, with Bitcoin’s price rising from $26,100 on May 25 to $28,450 on May 29. On the other hand, the April expiry resulted in a 7% correction, with Bitcoin’s price dropping from $29,900 on April 27 to $27,800 on May 1. These examples demonstrate the influence options expiry can have on setting trends.

Bulls Have Regulatory and ETF Momentum

In addition to the upcoming options expiry, there are several factors contributing to the bullish momentum in the blockchain industry. Multiple spot Bitcoin ETF requests have been made by some of the world’s largest fund managers, including BlackRock and Fidelity. This indicates a growing interest and confidence in Bitcoin as an investment vehicle.

Furthermore, regulatory advancements are supporting the bullish stance. On July 26, a U.S. Lower House Committee approved a pair of bills aiming to clarify the distinctions between securities instruments and digital commodities. This regulatory clarity provides a sense of security and legitimacy to the market.

Positive corporate earnings also contribute to the bullish momentum. Companies like Meta Platform reported $32 billion in 2Q revenues, surpassing market estimates. Other companies, including McDonald’s, Coca-Cola, Google, Johnson & Johnson, Morgan Stanley, and Novartis, have also reported earnings above consensus. Additionally, the U.S. Consumer Confidence metric reached its highest level in 2 years, indicating a positive outlook for risk-on markets.

Data Shows Excessive Optimism Among Bulls

As the options expiry approaches, there is excessive optimism among bullish traders. The open interest for the July 28 expiry is $2 billion, but the actual figure is expected to be lower because some traders anticipated price levels of $31,000 or higher. This optimism stems from Bitcoin’s price trading above the resistance level from July 13 to July 24.

The put-to-call ratio, which reflects the imbalance between buy and sell options, currently stands at 0.56. However, if Bitcoin’s price remains near $29,500 at the expiry time, only around $137 million worth of call options will be available. This difference occurs because the right to buy Bitcoin at higher levels becomes useless if the price remains below those levels on expiry.

Bitcoin Bears Aim for Sub-$29,000 for Profit

Based on the current price action, there are four likely scenarios for the options expiry on July 28, each favoring either call or put options:

  1. Between $27,000 and $28,000: 1,100 calls vs. 10,000 puts. The net result favors put instruments by $240 million.
  2. Between $28,000 and $29,000: 3,000 calls vs. 6,800 puts. The net result favors put instruments by $110 million.
  3. Between $29,000 and $31,000: 6,500 calls vs. 6,600 puts. The result is balanced between put and call options.
  4. Between $31,000 and $32,000: 15,400 calls vs. 3,800 puts. The net result favors call instruments by $360 million.

It’s important to note that the bulls’ best shot requires a 5.5% price increase ahead of the expiry, while bears only need a modest 2% correction below $29,000 to come out ahead. However, given that Bitcoin has recently failed to break the $29,000 support level, the most probable outcome for the expiry is a neutral area near $30,000.

When considering a broader mid-to-long term scenario, Bitcoin bears may have the upper hand due to higher fixed-income returns resulting from reduced inflation and increased interest rates. However, considering the overall bullish momentum in the economy and the regulatory and ETF developments, there’s a favorable outlook for Bitcoin to break above $31,000 in the following weeks.

In conclusion, the upcoming Bitcoin options expiry on July 28 has the potential to impact the market and establish $29,500 as a support level. While historical data shows the influence of options expiry on price movement, the overall bullish momentum in the blockchain industry, driven by regulatory advancements and positive corporate earnings, suggests a favorable outlook. Traders have displayed excessive optimism, but a neutral area near $30,000 is the most probable outcome. In the broader perspective, Bitcoin bears may have advantages due to inflation and interest rates, but the overall market trend remains positive for Bitcoin to break above $31,000.

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