Bitcoin Drops To 3-Week Low, Will $22B Options Expiry Help?

Key takeaways:

• Traders reduced bullish positions, signaling mixed market sentiment ahead of Friday’s $22 billion monthly Bitcoin options expiry.

• Stablecoin premiums and Bitcoin ETF inflows indicate cautious optimism, suggesting traders may seek gains in the near term.

Bitcoin (BTC) dropped to its lowest level in over three weeks, triggering $275 million in liquidations of leveraged bullish positions. Traders are questioning whether the looming $22 billion BTC options expiry on Friday explains the dip below $109,000 and if professional investors anticipate further price declines.

At Binance, top traders reduced long (bullish) positions on Tuesday and Wednesday, driving the long-to-short ratio to 1.7x, the lowest level in more than 30 days. As Bitcoin fell below $112,000, these traders began reversing course, adding upward exposure as the indicator slowly climbed back to 1.9x in favor of longs.

Meanwhile, whales and market makers at OKX moved in the opposite direction, adding longs between Tuesday and Wednesday, likely betting that $112,000 support would hold. By Thursday, OKX’s long-to-short ratio surged to 4.2x, the highest in over two weeks. Bitcoin’s decline to $108,700, however, caught these players off guard, forcing them to reduce leverage at a loss.

Bitcoin put options would take $1 billion lead if price falls below $110,000

Bearish bets for Bitcoin’s monthly options expiry at 8:00 am UTC on Friday targeted the $95,000 to $110,000 range. If bulls fail to reclaim the $110,000 level by then, put (sell) options would gain a $1 billion advantage. 

Some analysts, however, expect selling pressure to ease after the expiry, as BTC derivatives have demonstrated resilience in recent weeks, with open interest and funding rates remaining relatively stable despite the recent price dip.

Bitcoin’s 2-month futures premium relative to spot markets held steady at 5%, within the neutral 5% to 10% range. This indicates limited appetite for bullish positions, while also reflecting that shorts are cautious and not aggressively betting on further downside. Bitcoin futures open interest remains robust at $79 billion, down 3% over the past two days, according to CoinGlass data.

Additionally, Bitcoin exchange-traded funds recorded $241 million in net inflows on Wednesday, supporting moderate optimism among investors. At the same time, concerns over the US labor market mentioned by US Federal Reserve Chair Jerome Powell persist. The Labor Department reported Thursday that continuing jobless claims were relatively flat at 1.926 million for the week ending Sept. 13.

Bitcoin under pressure due to potential US government shutdown

Bitcoin is facing pressure from traders’ rising risk aversion, particularly amid concerns about a potential US government shutdown. A memo from US President Trump’s Office of Management and Budget (OMB), first reported by Politico, instructed government agencies to revise plans ahead of a possible discretionary funding lapse on Oct. 1.

Stablecoin demand in China provides additional insight into traders’ positioning. Typically, a strong interest in cryptocurrencies pushes stablecoins about 2% above the official US dollar rate. By contrast, a discount exceeding 0.5% often signals fear, as traders exit the crypto market.

Related: Bitcoin crumbles below $109K, but data shows buyers stepping in

Currently, Tether (USDT) is trading at a modest 0.3% premium relative to the official USD/CNY rate, suggesting a neutral market. This indicates that some traders may be injecting capital into cryptocurrencies to take advantage of the recent dip, supporting the view of those expecting gains following Friday’s options expiry.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.