Jai Sahu
Bitcoin maintained its position above $40,000 as it traded in the European markets on Thursday, despite a relatively stable performance of the US dollar index. This stability came just ahead of the eagerly anticipated release of the US fourth-quarter gross domestic product (GDP) data.
As of 09:38 UTC, Bitcoin, the leading cryptocurrency by market capitalization, was priced at $40,100. Earlier in the week, it had briefly dipped to $38,500 before rebounding. Meanwhile, the dollar index, which measures the strength of the US dollar against major world currencies, was holding steady at around 103.70, slightly down from its recent high of 103.82 earlier in the week.
Traders have been revising their expectations regarding the likelihood of early interest rate cuts by the Federal Reserve. This reassessment comes amid ongoing concerns about inflation in the global economy, particularly in the Red Sea region. According to the latest data from Fed funds futures, traders now see a 50% chance of a Fed rate cut happening in March, a significant decrease from the 80% probability estimated just a month ago.
Market watchers anticipate potential adjustments in traders’ positions following the release of the US GDP data at 13:30 UTC. Analysts expect the data to reveal that the world’s largest economy grew at a seasonally adjusted annualized rate of 2% in the final quarter of 2023. This would mark a decline from the 4.9% growth recorded in the third quarter and the lowest reading since the second quarter of 2022, according to CNBC.
In addition to the GDP report, traders are keeping a close eye on the expiry of cryptocurrency options on Deribit, the world’s largest crypto options exchange. On Friday at 08:00 UTC, Bitcoin options worth $3.75 billion and Ether options worth $2.07 billion are set to expire, accounting for over 85% of the global options market.
Luuk Strijers, Chief Commercial Officer at Deribit, noted, “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.” Strijers explained that traders have been rolling their positions forward from January expiry contracts to February expiry contracts.
Data shows that the maximum pain point for Bitcoin’s January expiry options is $41,000, while Ether’s is $2,300. The maximum pain point represents the level at which options buyers would incur the most significant losses upon expiry. In traditional markets, options sellers, typically well-capitalized institutions, aim to push the underlying spot market closer to the maximum pain point before expiry to maximize losses for options buyers.