Bitcoin Faces Key Resistance as $2 Billion in Options Contracts Expire

As the crypto market braces for a significant event, around $2 billion in cryptocurrency options contracts are set to expire today, Friday, July 12. This event includes approximately 23,700 Bitcoin options contracts with a notional value of around $1.49 billion. The question on every investor’s mind is whether this expiry will have the power to reverse the ongoing market downtrend.

Bitcoin Options Expiry: Key Details

Today’s Bitcoin options expiry event carries a put/call ratio of 1.08, indicating a balanced distribution between long and short positions. This balance suggests that both bullish and bearish sentiments are evenly matched, leading to uncertainty in market movements. The max pain point, or the price level at which the most losses will be incurred by option holders, is set at $58,500. This is slightly above the current spot price of Bitcoin.

Despite this balance, there remains approximately $800 million in open interest at the $100,000 strike price. Additionally, significant open interest exists at strike prices above $65,000, indicating that many derivatives traders remain optimistic about Bitcoin’s future performance.

Ethereum Options and Market Sentiment

In addition to Bitcoin, a substantial number of Ethereum options are also expiring today. Specifically, 157,000 Ethereum options with a notional value of $490 million are due to expire. These options have a put/call ratio of 0.37 and a max pain point of $3,100, reflecting a more bullish sentiment compared to Bitcoin.

Crypto derivatives provider Greeks Live noted that crypto markets have “rebounded modestly” this week, with major term implied volatility (IV) dropping to new lows since March. IV measures expected future volatility derived from expiring crypto derivatives contracts. Greeks Live observed that the recent market conditions created a favourable environment for options sellers, who built up their positions heavily this week, leading to a significant drop in major term IVs.

Market Outlook and Broader Implications

Despite the modest rebound in crypto markets, overall sentiment remains cautious. Total crypto market capitalization has dipped slightly over the past 24 hours to $2.22 trillion, a level not seen since late February. Bitcoin has struggled to maintain momentum above $58,000, falling below $57,000 during Asian trading on Friday before making a slight recovery. Similarly, Ethereum attempted to break above $3,200 but failed, dropping back below $3,100.

Greeks Live commented that the entire risk asset market, including cryptocurrencies, is looking toward a potential rate cut in September to provide relief. The current weak performance of U.S. stocks adds to the overall cautious sentiment in the market.