Bitcoin (BTC) holds above $40,000 ahead of US GDP, $5.8 billion worth of crypto options expire

During European trading hours on Thursday, Bitcoin (BTC) attempted to gain a foothold above $40,000, with the dollar index holding steady ahead of highly anticipated U.S. fourth-quarter gross domestic product (GDP) data.

At 09:38 UTC, the leading cryptocurrency by market cap was changing hands at $40,100 after testing a decline in demand near $38,500 earlier this week. The dollar index, which measures the value of the greenback against major fiat currencies, consolidated at 103.70, down 103.82 from highs reached on Monday.

Traders have been pondering the prospects of Fed rate cuts soon amid the ongoing inflation crisis in the Red Sea. According to Fed funds futures, traders now see a 50% chance that the Fed will cut interest rates in March, up from 80% a month ago.

Further adjustments are expected later today following the release of US GDP at 13:30 UTC. According to CNBC, the data is expected to show GDP in the world's largest economy in the last three months of 2023 at a seasonally adjusted annualized rate of 2%, down from the 4.9% in the third quarter and the lowest level since the second quarter of 2022.

At 08:00 UTC Friday, $3.75 billion worth of Bitcoin options and $2.07 billion worth of Ether options 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 is clear that the market is steadily recovering from the initial shocks of the ETF launch and GBTC liquidation. In particular, the call-put skew has increased from a previous low, indicating a shift in market sentiment,” said Lukk Strijers, chief commercial officer at Deribit.

Strijers said traders moved their positions from contracts due in January to contracts due in February.

The data shows that Bitcoin's maximum pain point for January expiring options is $41,000, while Ether's is $2,300. The maximum pain point is the level at which option buyers suffer the largest loss at expiration. The theory in traditional markets is that options sellers, typically institutions with sufficient capital, attempt to push the underlying spot market closer to the maximum pain point before expiration in order to inflict maximum damage on buyers.

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