Bitcoin (BTC) has been struggling to maintain the psychologically important $40,000 level in recent days. As a major crypto options expiry approaches this Friday, the market is watching closely to see if Bitcoin can continue holding this key support.
Initially, Bitcoin looked poised to establish support above $40,000 during Thursday's European trading session. However, the dollar index traded flat ahead of the highly anticipated U.S. fourth-quarter gross domestic product (GDP) report. Consequently, Bitcoin faced selling pressure and dipped below $40,000 briefly.
The Upcoming Crypto Options Expiry
On Friday at 08:00 UTC, Bitcoin options worth $3.75 billion and Ether options worth $2.07 billion will expire on Deribit. This crypto options exchange accounts for over 85% of global crypto options activity. Therefore, the impending options expiry is expected to fuel increased volatility in the crypto markets.
Some analysts expect Bitcoin to retest lower support levels before the expiry. However, other experts believe the expiry could provide bullish momentum if most options finish out of the money. Essentially, Bitcoin holding above $40,000 through the expiry would force options sellers to buy BTC to hedge their positions.
Overall, the crypto options expiry represents a crucial test for Bitcoin to maintain its recent gains. While BTC has rebounded from lows below $33,000 last month, the path forward remains unclear. Unless Bitcoin can firmly establish the $40,000 level as support after the options expiry, another breakdown towards $30,000 cannot be ruled out.
Macroeconomic Factors in Play
Ultimately, Bitcoin's price action will depend on key macroeconomic factors in traditional markets. For instance, if the U.S. GDP report shows the economy is slowing more than expected, investors may flock to Bitcoin as an inflation hedge. However, an upbeat GDP print could strengthen the dollar and weigh on Bitcoin in the short-term.
In particular, the pending GDP data has the potential to impact Bitcoin’s momentum. If the economy outpaces forecasts, the Federal Reserve may continue its aggressive rate hikes, benefiting the dollar. In contrast, a weaker GDP reading could deter further Fed rate hikes, providing potential tailwinds for Bitcoin.
Conclusion and Outlook
In conclusion, this week's major crypto options expiry has the potential to fuel increased volatility. However, Bitcoin maintaining $40,000 support after the expiry could signal continued upside momentum.
Crypto investors should watch for BTC's reaction at this psychologically important level heading into the weekend. Ultimately, Bitcoin’s ability to hold $40,000 after the options expiration will provide critical clues about the crypto market’s direction in the near-term.
