Bitcoin Holds Above $40K Ahead of U.S. GDP, $5.8B Crypto Options Expiry

Bitcoin [BTC] looked to establish a foothold above $40,000 during Thursday's European trading hours, with the dollar index trading flat ahead of the highly-anticipated U.S. fourth-quarter gross domestic product (GDP) data.

At 09:38 UTC, the leading cryptocurrency by market value changed hands at $40,100, having tested dip demand near $38,500 early this week. The dollar index, which gauges the greenback's value against major fiat currencies, consolidated near 103.70, down from highs around 103.82 reached Monday.

Traders have been rethinking prospects of early Fed rate cuts amid the ongoing inflationary crisis in the Red Sea. According to the Fed funds futures, traders now see a 50% chance of a Fed rate cut in March, down from 80% a month ago.

Further adjustments may be seen later today following the release of the U.S. GDP at 13:30 UTC. The data is expected to show the world's largest economy's GDP at a 2% seasonally adjusted annualized pace in the final three months of 2023, retreating from the 4.9% in Q3 and the lowest reading since the second quarter of 2022, according to CNBC.

Focus on expiry

On Friday at 08:00 UTC, bitcoin options worth $3.75 billion and ether options worth $2.07 billion will expire on Deribit, the world's largest crypto options exchange, accounting for over 85% of the global activity.

"As we approach tomorrow's options expiry, it's clear the market is steadily recovering from the initial shocks of the ETF introduction and GBTC unwind. Notably, call-put skew has been increasing from an earlier low, indicating a shift in market sentiment," Lukk Strijers, Chief Commerical Officer at Deribit, said.

Strijers said traders have been rolling their positions forward from January expiry contracts to February expiry contracts.

Data show the max pain point for bitcoin's January expiry options is $41,000, while ether's is $2,300. The max pain point is the level at which options buyers stand to lose the most on expiry. The theory in traditional markets is that options sellers, usually institutions with ample capital supply, try to move the underlying spot market closer to the max pain point ahead of the expiry to inflict maximum damage on buyers.

Tomorrow, $5.82 billion in crypto options is set to expire 📉

BTC Options Notional Value: $3.75 billion
Put/Call Ratio: 0.52 Max
Pain Point: 41,000

ETH Options Notional Value: $2.07 billion
Put/Call Ratio: 0.31
Max Pain Point: 2,300

DVOL: 45.9

Monthly Expiration:… pic.twitter.com/THsD1SStmw

— Deribit (@DeribitExchange) January 25, 2024