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Bulls gained some traction, but holding the $32,000 support level will determine who wins Friday’s $330 million BTC options expiry.
The open interest in this Friday’s weekly Bitcoin (BTC) options expiry is currently $330 million. Given the recent battle to reclaim the $32,000 support, this event is an important litmus test for bulls’ willingness to exhibit reversion signs.
On July 21, Alameda Research announced that it had purchased Bitcoin for less than $30,000, and Sam Trabucco, the firm’s quantitative trader, stated that the narrative for BTC could turn bullish due to the ongoing fear, uncertainty, and doubt (FUD) caused by the China BTC mining ban, Grayscale GBTC unlock, and stock market recovery.
The chart above shows that if the price breaks the $32,200 resistance, the current downtrend channel, which began three weeks ago, may be invalidated. Elon Musk’s statement that his company SpaceX also holds Bitcoin appears to have sparked the move.
Musk stated during a July 21 meeting with Cathie Wood and Jack Dorsey that, despite rumours, he completely rejects recent speculations that Tesla has been selling some of its Bitcoin position.
— New York Post (@nypost) May 17, 2021
It is worth noting that the rumors had some backing only because Musk gave conflicting signals on social networks. Moreover, Tesla had previously sold 10% of its Bitcoin holdings in the previous month.
The $32,000 support is crucial for bulls
The expiration of options on Friday may be the first strength test of this recent rebound. If bulls want to establish $32,000 as a support level, they must cause as much damage as possible to neutral-to-bearish put (sell) options.
The put-to-call ratio is the first signal that bears have been attempting to dominate. The 0.81 reading reflects a lower number of neutral-to-bullish call (buy) options expiring on July 23.
Bears, on the other hand, may have set themselves up for a trap because 96 percent of the put options had strike prices of $32,000 or less. If Bitcoin remains above that level at 8:00 a.m. UTC on Friday, only $8 million put options will expire.
On the other hand, there are $29 million in call options with a strike price of $32,000 available. Bulls benefit from the $21 million difference. Even though it is minor, it is diametrically opposed to an expiry of less than $32,000.
If $32,000 fails to hold, bears will have a $9 million lead because only 9% of call options are priced at $31,000 or less.
Neither outcome is particularly significant, but the profits could be used to fund the larger upcoming monthly option expiry on July 30. This is the primary reason why bulls must hold their ground in order to maintain the current momentum.