Bitcoin (BTC) is on the brink of its second-largest monthly options expiry of 2024, with a total exposure of $8.1 billion. The question is whether this will be enough to drive a strong rally towards $70,000, or if the bearish forces are too powerful to ignore.
The current macroeconomic climate favors risk-on assets like Bitcoin, and the upcoming options expiry on September 27th will be a crucial event. Those holding neutral-to-bullish options are well-positioned to benefit if Bitcoin stays above $63,000. However, the bears have enough incentive to prevent this advantage by pushing the price below $60,000. Therefore, it’s essential to analyze the positioning of the options market and the potential impact of the monthly expiry.
On September 24th, the Chinese stock market experienced a surge following the announcement by the People’s Bank of China (PBOC) of plans to lower borrowing costs and inject liquidity into the economy, including reduced mortgage repayment programs. The PBOC also pledged $113.8 billion to support the stock market through share purchases and buybacks. Lynn Song, chief economist for Greater China at ING, stated that there is still room for further easing in the months ahead.
Essentially, China has followed the more accommodative monetary policy of the US, which favors risk-on assets like Bitcoin. By stimulating economies and lowering interest rates, central banks are reducing the attractiveness of fixed-income investments while fueling inflationary pressures. In such environments, scarce assets like Bitcoin tend to outperform, especially when the S&P 500 is near its all-time high and home prices in major US metro areas have increased by 5.9% over the past year, according to the Case-Shiller Index.
Given these favorable macroeconomic conditions, Bitcoin bulls have reason to believe that the $63,000 level will hold until the September 27th options expiration, and there may even be a push towards $65,000. However, to assess the likelihood of this bullish momentum, it is crucial to examine the positioning of Bitcoin options traders ahead of the expiry.
The aggregate open interest for Bitcoin options on September 27th is $4.9 billion for call (buy) options and $3.2 billion for put (sell) options. While it is not uncommon for crypto traders to lean bullish, the excessive optimism reflected in bets on Bitcoin prices of $90,000 and higher seems overly ambitious, especially with less than three days remaining before these options expire.
In fact, 55% of the call options are set at strike prices of $70,000 or higher, leaving $2.22 billion in notional value with a realistic chance of participating in the September monthly expiry. Similarly, 69% of put options are set at $56,000 or lower, making them likely to expire worthless and reducing the outstanding notional value to around $1 billion.
The call options for Bitcoin are well-positioned, favoring the bulls. The following are the four most likely scenarios based on current price trends, taking into account the availability of call and put options for the September 27th expiry, depending on Bitcoin’s settlement price at the time.
This estimate assumes that call options are primarily used for bullish positions, while put options are used for neutral-to-bearish strategies. However, it is important to note that this is a simplification and does not account for more complex investment tactics.
Between $57,000 and $58,000: The net outcome favors the put options by $250 million.
Between $58,000 and $60,000: The net result is expected to be roughly balanced between call and put options.
Between $60,000 and $62,000: The net outcome favors the call options by $550 million.
Between $62,000 and $64,000: The net result favors the call options by $1 billion.
The bears are under significant pressure to push Bitcoin’s price below $60,000 before the September monthly expiry to avoid a scenario where call options benefit by $550 million. However, given the supportive macroeconomic conditions, including interest rate cuts by the US Federal Reserve and stimulus measures from China’s central bank, the odds seem to be in favor of the Bitcoin bulls.
This article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.