According to crypto trader Mags, Bitcoin, the flagship cryptocurrency, recently posted a notable +55% increase, breaking out of a smaller, widening wedge pattern.
Mags shared insights into this significant price move, monitored Bitcoin's breakout, and suggested a medium-term target at the “upper trendline resistance of a larger, widening wedge.”
This increase is largely due to several catalysts, such as increasing interest from institutional investors and the US approval of spot Bitcoin exchange-traded funds (ETFs).
The upcoming options expiration affects the Bitcoin price
However, Bitcoin has seen a slight decline in the last 24 hours after its recent surge. Although the asset has risen significantly over the past month, it has fallen by almost 10% in the past day, with its current trading volume slightly down to $44 billion from over $50 billion yesterday.
BTC price is moving sideways on the 1-hour chart. Source: BTC/USDT on TradingView.com
This sudden drop is largely due to the impending options expiration. According to options trading platform Greeks.live, 36,000 BTC options are about to expire, with a put-call ratio of 0.9.
Specifically, the “Put-Call Ratio” serves as a sentiment indicator and assesses market sentiment by comparing the volume of put options to call options. It is calculated by dividing the number of put options traded by the number of call options traded.
Put options grant the holder the right (but not the obligation) to sell a specific amount of an underlying asset at a predetermined price within a specific period of time. Conversely, call options give the holder the right (but not the obligation) to purchase a specific amount of an underlying asset at a set price within a specific period of time.
The put-call ratio is interpreted in two ways: a high ratio (greater than 1) and a low ratio (less than 1). A low ratio suggests that more call options are being purchased than put options, indicating bullish market sentiment as more traders expect the market to rise.
Conversely, a high ratio means that more put options are being purchased than call options, indicating bearish market sentiment as more traders anticipate a market decline.
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Options data as of January 12th
36,000 BTC options are about to expire, with a put-call ratio of 0.9, a maxpain point of $45,000, and a notional value of $1.68 billion.
262,000 ETH options expire with a put-call ratio of 0.64, a maxpain point of $2,400 and a notional value of $680… pic.twitter.com/LSKNGKVjrH
— Greeks.live (@GreeksLive) January 12, 2024
Since Bitcoin’s put-call ratio is currently at 0.9, as reported by Greeks.live, this suggests that traders are leaning towards a bearish move for Bitcoin. This expected decline could contribute to Bitcoin's current decline, although spot trading in Bitcoin ETFs recently began in the US.
Bitcoin’s bullish potential
Despite the current decline, market analysts suspect that this downturn could be short-lived. As crypto trader Mags pointed out, breaking out of a smaller, widening wedge pattern signifies bullish sentiment in the short term.
The +55% advance marks a rebound from previous lows and sets the stage for a possible move toward the upper trendline of a larger, widening wedge. Such a pattern suggests that Bitcoin could be primed for further significant price movements soon.
Additionally, the “Max Pain” point as determined by Greeks.live is currently set at $45,000 for Bitcoin, representing a total notional value of $1.68 billion. This point, where option holders suffer the greatest financial loss, is a crucial indicator of potential market direction.
According to Greeks.live analysis, the upcoming 36,000 BTC options expiration suggests that the market is poised for significant moves. In anticipation of this dynamic, Greeks.live reported that a shift in trading strategies has been observed, with an increasing focus on “LONG GAMMA” approaches.
Featured image from Unsplash, chart from TradingView
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