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- Bitcoin options worth $8.1 billion could expire by the end of the week.
- A look at current market conditions and behavior leading up to the main day.
Bitcoin [BTC] have had an impressive rally so far this month, but how long can the bulls keep this momentum going? There may be a retracement before the end of this week due to options expiration.
More than $8.1 billion worth of Bitcoin options are reportedly set to expire this week. This could mean volatility for the cryptocurrency in the coming days.
This is because options expiration can lead to a significant reaction in the market. However, this will depend on the prevailing sentiment among investors.
The balance between calls and puts will determine the outcome. Higher call options align with bullish sentiment and higher put options indicate bearish expectations.
Bitcoin’s fear and greed indicator revealed that sentiment has been tilting in favor of the bulls in recent days.
Source: alternative.me
Market sentiment is fluid, meaning there could be room for dramatic changes between now and when these options expire.
Additionally, the put/call ratio and open interest have historically been used to gauge bullish or bearish sentiment.
A put/call ratio above 1 is traditionally considered a bearish sign, while hit 1 is considered a bullish sign.
According to Barchart.comBitcoin’s put/call open interest ratio was 1.12, while its put/call volume ratio was 5 at the time of writing.
More Bitcoin Volatility Ahead?
Meanwhile, both open interest and foreign exchange reserves have risen over the past three weeks.
The high Open Interest paves the way for more volatility, while Bitcoin’s rising currency reserves are causing traders to move coins to exchange addresses. So traders may be preparing for a liquidation if the market changes.
Source: CryptoQuant
Although Open Interest and foreign exchange reserves have grown, there is also a significant chance that calls will be dominant.
Bitcoin had approx $6 billion worth of options contracts by the last Friday of March 2021. Optimistic expectations for the following months favored call options.
As a result, the price delivered a bullish performance the following month.
Bitcoin’s current position is similar to that of the last Friday of 2024, when the bulls took a break after a strong rally. The bulls resume despite high expectations of a bearish correction.
Read Bitcoin’s [BTC] Price forecast 2024–2025
While this doesn’t necessarily mean the bulls will continue to build on their latest momentum, it does underline a very likely outcome.
Ultimately, the price of BTC ultimately depends on the buying or selling pressure that will prevail in the coming days.