Bitcoin’s price fell below the $40,000 support level on January 18, marking the first time in 50 days. The upcoming $4.5 billion BTC monthly options expiry on January 26 could determine whether the downtrend will continue. Interestingly, the US stock market reached an all-time high on January 22, suggesting that Bitcoin’s performance is likely unrelated to the macroeconomic scenario.
Some analysts believe that the selling pressure on Bitcoin is primarily due to Grayscale GBTC. Since its conversion to a spot exchange-traded fund (ETF) on January 11, GBTC has experienced significant outflows. The instrument currently holds over $25 billion in assets and was previously unable to accommodate redemption requests from investors.
An influential Bitcoin figure, @alanbwt, described this situation as “the biggest blown lead in the history of Bitcoin.” While Grayscale’s GBTC started January 11 with a $27 billion capitalization, other contenders like Fidelity, BlackRock, and Bitwise had to start from scratch. However, Grayscale’s decision to impose a 1.5% yearly administration fee, much higher than its competitors, triggered the selling pressure on GBTC shares.
The decline in Bitcoin’s price since the spot ETF trading debut on January 12 coincided with the US 2-year Treasury yield bottoming at 4.12%. As the yield climbed to the current 4.39%, investors no longer sought protection in fixed income. This movement is likely due to recent economic indicators suggesting that the Federal Reserve (Fed) may not shift to a less restrictive posture as quickly as expected.
The Fed’s decision on interest rates in the coming months depends on the fourth-quarter gross domestic product data on January 25 and the Personal Consumption Expenditures index (PCE) on inflation on January 26. Unfortunately for Bitcoin investors, high interest rates reduce the incentives for investors to seek exposure in commodities like Bitcoin, compared to stocks that offer dividends.
Bitcoin investors will need to wait until 8:00 am UTC to determine whether the blow to bulls’ call options, based on the expectation of a price rally after the spot ETF approval, is significant.
Data shows that bulls were excessively optimistic about the spot ETF approval. The open interest for the options expiry on January 26 is $4.5 billion, but the final amount will be lower as traders expected higher price levels, such as $42,000. The unexpected 15% correction in Bitcoin’s price from January 11 to January 22 caught bullish investors off guard, as seen from the Deribit Bitcoin options interest chart.
Deribit’s 0.55 BTC put-to-call ratio indicates an imbalance between the $2.42 billion in call options and the $1.32 billion in put options. Similar ratios were observed on CME Bitcoin options and OKX exchange. Bybit and Binance held a combined $290 million open interest for the January 26 BTC options expiry.
To put it into perspective, if Bitcoin’s price trades at $39,900 on the January monthly expiry, only $55 million worth of call options will be available. This is because the right to buy Bitcoin at $40,000 or $42,000 is useless if BTC trades below that level on expiry. On the other hand, put options at $40,000 or higher amount to $270 million, presenting an opportunity for bears to exert short-term pressure on BTC.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research and make informed decisions when it comes to investments and trading.