Bitcoin Gets Fresh Start After Flush Of Options Open Interest

Picture of gold bitcoin on top a circuit board

Bitcoin started 2022 on a different trajectory than the one expected by most traders. Moving sideways for the majority of Q4 last year, the first crypto by market cap seems proposed to more volatility in either direction.

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As of press time, Bitcoin trades at $46,803 with sideways movement in the last 24 hours. BTC’s price returned to its current levels after a rejection around the $50,000 area as 2021 came to an end.

BTC moving sideways in the 4-hour chart. Source: BTCSUD Tradingview

Data from Material Indicators shows strong support below Bitcoin’s current price as $10 million in bids order sit around $45,000 with an additional $36 million distribute between $44,000, $43,000, and $42,000. These levels could become the bulls’ final line of defense in case of further downside.

Above Bitcoin’s current price there is no significant resistance until $59,000 which records $13 million in ask orders. This doesn’t imply BTC will move straight in that direction as buyers still need to display conviction and hold the aforementioned support levels.

BTC price (blue line) and its support levels (in yellow below the price) in low timeframes. Source: Material Indicators

According to data from Arcane Research, the Bitcoin market for the derivatives sector has been reset, as $5.8 billion in BTC options expired on December 31st. This represents one of the largest expiry events which led to a 47.8% decline in Open Interest (OI) for this sector. Arcane Research claimed the following:

This (decline in OI) could be circumstantial, but it could also be caused by the market structure with options expiries as well as futures expiry (…)

The research firm also claimed that most of the options with far out of the money bullish strikes ended 2021 “worthless”. The options market has been a great part of the dynamics for the BTC’s price action in the last 2 years and, if history repeats, could hint at what’s next for the cryptocurrency in Q1, 2022. Arcane Research said:

The options market could potentially contribute to anchoring the BTC price. In January, February, March, April, October, and November, bitcoin saw strong returns in the first half of the expiry period and negative returns in the second period.

New Year, New Market Dynamics For Bitcoin? The Price Of Adoption

Despite the support below, Bitcoin could attempt to fill the wicked at $42,000 printed on December 3rd. Analyst Justin Bennet claimed that BTC has historically dipped into similar downside movements before resuming its bullish momentum.

Source: Justin Bennett via Twitter

Bennet believes BTC’s price action can no longer be classified as only bull v. bear market. On the contrary, the analyst thinks there are more “gray areas” due to the participation of new players and institutions.

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John Bollinger, the creator of the Bollinger Bands indicator, seems to share a similar position on the potential changes experienced by the BTC market. Via Twitter, Bollinger said:

Some thoughts on bitcoin. You have to be careful what you wish for: Everyone wanted wide adoption, listed futures, options, ETFs, etc. Well, you got all that and more including burgeoning regulation. The rub is that these things have totally changed the character of trading.

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