Key Points:
The expiration of $14 billion in Bitcoin options on Friday has led to a predominance of neutral to bearish bets, as most call (buy) strike prices are above $91,000, increasing pressure on bulls.
Despite recent losses, Bitcoin traders are still accumulating year-end call options near the $100,000 mark, indicating that bullish expectations remain.
On Tuesday, Bitcoin's price fell after failing to hold the $89,200 level reached the previous day. Traders are increasingly concerned that the $14 billion Bitcoin options expiration on Friday could reinforce bearish sentiment following weak private employment data and a decline in U.S. consumer confidence.
The total open interest for Bitcoin call (buy) options stands at 104,300 Bitcoin, valued at $9.12 billion at current prices. However, a 23% drop in Bitcoin over the past 30 days has caught bulls off guard, as 84% of positions are above $91,000. If the spot price remains near current levels, these contracts will expire worthless.
The total open interest for put (sell) options is 67,877, or $5.92 billion. Although this is 35% smaller than the call open interest, the put positions seem more aligned with the current market conditions, with 31% set at $84,500 or lower. Therefore, even if Bitcoin recovers some of its recent losses by November 28, the odds still lean towards a neutral to bearish outcome.
Risk sentiment further deteriorated after payroll processing firm ADP reported that U.S. private sector jobs decreased by an average of 13,500 per week over the past four weeks. A weakening labor market poses additional challenges to the consumption-driven economy.
The Conference Board subsequently reported that consumer confidence in November fell to 88.7, down from 95.5 the previous month, further weakening investor sentiment. Income and business expectations also declined in tandem, remaining significantly below the neutral threshold of 80% for the tenth consecutive month, according to Yahoo Finance.
Despite the deteriorating economic indicators weighing on investor expectations, they also increase the likelihood of the Federal Reserve adopting a more accommodative monetary stance. As traders anticipate additional liquidity measures from the U.S. Treasury to help stabilize the economy, gold rose by 1.2%, and the Russell 2000 small-cap index increased by 1.9%.
On Monday, President Trump signed the "Genesis Mission" executive order aimed at accelerating artificial intelligence development and reducing perceived risks associated with energy shortages and long-term financing needs, as large-scale high-performance computing facilities could exacerbate credit market pressures.
Bitcoin traders have increased their year-end call option positions in the $100,000 to $112,000 range over the past 48 hours, indicating that mid-term optimism still exists despite recent price weakness.
Here are five possible scenarios for the November Bitcoin options expiration based on current price trends:
Between $85,000 and $87,000: Net result leans towards put (sell) instruments, amounting to $1.9 billion.
Between $87,001 and $88,000: Net result leans towards put (sell) instruments, amounting to $800 million.
Between $88,001 and $89,000: A balanced result between call and put options.
Between $89,001 and $90,000: Net result leans towards call (buy) instruments, amounting to $600 million.
Between $90,001 and $92,000: Net result leans towards call (buy) instruments, amounting to $3.8 billion.
It may be too early to completely dismiss bullish Bitcoin option strategies. Investor sentiment remains closely tied to macroeconomic conditions and expectations of potential global central bank stimulus measures.
Related: Texas buys the dip in Bitcoin (BTC), purchasing $5 million in BlackRock IBIT
Original article: “Bitcoin wavers under $88K as $14B BTC options expiry draws near”
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