Bitcoin Plunges Despite Tesla Boost Ahead of Record Options Lapse




An earlier morning boost in the Bitcoin market Wednesday, led by Tesla’s announcement that it would accept the cryptocurrency as payment for its electric vehicles, turned jittery ahead of the US session close, leading to a decline of more than $5,500 and ending the day 3.81 percent lower.

Powell Strikes Again

The flagship cryptocurrency’s seesaw moves largely surfaced in the wake of Jerome Powell’s testimony before the Senate Banking Committee. The Federal Reserve chairman said that he is not concerned about the recent rise in longer-dated bond yields, adding that their climb reflects investors’ optimism in the US economic recovery against the prospect of the COVID-19 vaccine rollout.

There was a general expectation that the Fed would intervene if the bond yields rise too fast too far. But so far, the US central bank has avoided intervention, which has led to worries that it would let the yields rise for an unforeseeable future. As a result, assets that performed extremely well during the pandemic risk downside corrections. That includes tech stocks and bitcoin.

On Wednesday, Bitcoin and Wall Street rose and fell in tandem, showing a very similar reaction to Mr. Powell’s testimony.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin attempts to reclaim previous horizontal support near $53,000 on Thursday. Source: BTCUSD on TradingView.com

Bitcoin Options Expiry

The wobbling moves in the Bitcoin spot market also appeared as the focus shifted on a record options expiry.

An options contract is a type of derivative that gives traders the right but not obligation to buy or sell the underlying asset at a set price (or strike price) at or before an expiration date. Meanwhile, an out-of-the-money (OTM) situation arises when the strike price becomes higher or lower than the spot price.

Around 104,000 contracts worth more than $6 billion are looking to expire on major exchanges: Deribit, Huobi, OKEx, LedgerX, and others. Most of those open contracts come from Deribit, the world’s largest crypto options exchange by trading volume. It is on track to log a monthly bitcoin options expiry of more than 96,000 contracts.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Over $6 billion worth of Bitcoin options will expire on October 26. Source: ByBt.com

As of press time, the call options at strike prices above $52,875 are OTM. Similarly, put options at strike prices below the current spot price are also OTM.  Data obtained by ByBt.com shows that about 43 percent of bitcoin options contracts expiring this Friday are worthless.

With the remaining open interest, bulls remain in control, with the bitcoin options’ call/put ratio lurking near 1.13.

If Bitcoin continues to trade above $52,000, most put options will lose their value, which, in turn, would increase the opportunities of holding bullish call options. The upside interest lingers near $58,000, meaning the bitcoin spot market could see huge volatility between the two levels in the coming sessions.



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