• Bitcoin spot price expected to react to the expiring futures contracts on Friday.
  • Bitcoin futures contracts with a value of around $1 billion set to stop trading on Friday.
  • Options traders tend to pin the spot price in their favor in order to manage the risk of losses.

Bitcoin bulls have in the last 24 hours been battered significantly by the widespread selling pressure across the cryptocurrency market. Earlier this week the granddaddy of cryptocurrencies embarked on a gains accrual exercise, where the resistance at $9,800 was tested but not broken.

The surge was attributed to excitement following the rumor that PayPal, a significant player in the payments market, was considering support for cryptocurrencies. It seems that the breakout was not fundamentally nor technically supported as Bitcoin plunged, hitting lows marginally below $9,000 on Thursday.

The drop to $8,988 (intraday low) comes less than a day to the expiry of longer-term Bitcoin futures contacts. Over 114,000 futures contracts with a value of $1 billion will stop trading on June 26 on several exchanges such as Deribit, CME, Bakkt, LegerX and OKEx.

Futures contracts allow traders to long or short cryptocurrency assets without having to buy the underlying assets. The derivative are executed over a period of time where sellers either bet on the price increasing or falling. According to Vishal Shah, a trader in the options market, “this is definitely the largest BTC option expiry by a country mile.” The CEO of Skew, an on-chain data analysis firm, Emmanuel Goh:

With big quarterly expiry, you tend to see some pinning and then the market moving post-expiry.

It is believed that in a way, options traders influence the general direction of the asset’s price in a process referred to as “pinning.” In other words, the traders in the futures market work to sway the spot price of an asset (Bitcoin) in order to avert sharp losses. As Shah explains:

Depending on where the open interest [open positions] is scattered, you could be in the game to pin strikes. The bulk of distribution of OI [open interest] in general is skewed slightly higher.

At the time of writing, Bitcoin is trading at $9,150 after a 1.48% loss on the day. The price slipped marginally under $9,000 after hitting a wall at $9,300. $10,000 remains the ultimate resistance in the medium term. If recovery fails to materialize significantly, a dive towards $8,000 is likely to come into the picture following the expiry of the futures on Friday.
 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Chainlink price could surprise LINK holders, as it prepares for staking on Ethereum

Chainlink price could surprise LINK holders, as it prepares for staking on Ethereum

Chainlink is eyeing gains ahead of its staking launch on Ethereum mainnet in December. Staking is a core initiative of Chainlink Economics 2.0, a new program offering LINK holders the opportunity to earn rewards. 

More Chainlink News

Sam Bankman-Fried says FTX US is fully solvent, withdrawals could open today

Sam Bankman-Fried says FTX US is fully solvent, withdrawals could open today

Sam Bankman-Fried, popularly known as SBF, told New York Times’ Andrew Ross Sorkin that FTX US customers could be made whole soon. SBF claims that these entities: FTX US and FTX US derivatives, could be “up and running soon.”

More Cryptocurrencies News

XRP is highly undervalued and whales are accumulating, here’s what you should do

XRP is highly undervalued and whales are accumulating, here’s what you should do

Ripple (XRP) price shows a lack of volatility as it sits above a crucial support level that could make or break its short-term future. A spike in buying pressure is what the remittance token needs to kick-start its run-up.

More Ripple News

TRON price faces major resistance at these levels, is a sucker's rally underway?

TRON price faces major resistance at these levels, is a sucker's rally underway?

TRON price (TRX) has retaliated considerably against the bearish onslaught in November. Despite the optimistic gesture, TRX price still faces significant barriers of resistance.

More Tron News

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin: Assessing chances of one last bear market rally for 2022

BTC is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.

Read full analysis

BTC

ETH

XRP