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According to one analyst, the recent rise in Bitcoin price may have been influenced by a decline in open interest for Bitcoin options at certain strike prices.
“There is much less open interest at the $40,000 level, which could fuel Bitcoin’s recent rally,” cryptocurrency derivatives trader Gordon Grant told The Block. “Hedge traders’ relatively limited delta “This could fuel Bitcoin’s recent rally as supply suddenly loses the option to lean on big numbers.”
Open interest in short-term Bitcoin derivatives, particularly options, has decreased significantly since month-end options expired on Friday, January 26, Grant said.
This is in contrast to what Grant added ahead of last Friday’s options expiration, when “excessive local gamma could have capped the price of the underlying asset after a brief and sharp correction.”
The total outstanding Bitcoin options on major centralized derivatives exchanges peaked at more than $13 billion by expiration last Friday.
However, total open interest has fallen by more than $3 billion since expiration, to $9.88 billion, according to The Block’s data dashboard.
Bitcoin Open Interest Focused on $50,000
According to Deribit data, the largest amount of Bitcoin open interest for all upcoming expirations currently consists of calls with a strike price of $50,000, suggesting a bullish market sentiment.
Bitcoin options have open interest at the strike price for all upcoming expiration dates. Image: Deribit.
In options trading, a call option gives the holder the right, but not the obligation, to purchase the underlying asset at a specific price before or at the expiration date.
The fact that there is a large cluster of call options at $50,000 suggests that a significant number of traders may be expecting the price of Bitcoin to rise above $50,000.
Market observers predicted a price correction.
The price of Bitcoin has stayed above $42,000 over the past 24 hours, acting contrary to the predictions of some market observers.
According to Grant, “Market analysts and leading cryptocurrency soothsayers were predicting a price correction as low as around $33,600, but this has not materialized so far.”
Last week, BitMEX co-founder Arthur Hayes said that the Bitcoin price would continue to fall. In a blog post, Hayes predicted a 30% correction in Bitcoin, which reached around $48,000 on January 10, shortly after the approval of several spot Bitcoin exchange-traded funds.
According to Hayes, this correction could push Bitcoin lower to the $33,600 level and ultimately establish new support between $30,000 and $35,000.
“A 30% correction from the ETF’s approved high of $48,000 is $33,600. Therefore, I believe Bitcoin has support forming between $30,000 and $35,000,” Hayes wrote in a blog post.
The largest digital asset by market capitalization has traded little changed over the past 24 hours, trading at $42,243 at 7:30 a.m. ET, according to The Block data.
Bitcoin has remained above $42,000 for the past 24 hours. Image: Block.
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