Bitcoin and the Great Acid Test: Turning Point for the Crypto Market?

This week, the crypto world faces a crucial challenge as the expiration of quarterly options coincides with a significant inflation release in the U.S. This constellation could decisively influence the course of the recent rally. On Friday, cryptocurrency options worth approximately $22.3 billion will expire, according to Deribit, a major options exchange operator. The share of Bitcoin options amounts to an impressive $17.06 billion. Greg Magadini, head of the derivatives department at Amberdata, emphasizes that the current expiry of Bitcoin options is "the largest in the portfolio." Traders indicate that critical price levels at $109,000 and $108,000 must be maintained to avoid a drastic price slide. Short-term Bitcoin movements are strongly influenced by options traders and large institutions hedging their positions in real-time. Their gamma exposure, or the speed at which they adjust their hedges, can either amplify or dampen price fluctuations. However, a "short gamma" could force traders to sell in a declining market, potentially exacerbating the price drop. Data shows that $108,000 has become a critical point for Bitcoin traders. Falling below this level could trigger an automatic selling wave regardless of the upcoming inflation release. Given the trader positions and volatility of around 35%, Magadini expects that dropping below the $108,000 mark could lead to a drastic decline to $96,000, especially if markets are weak. All eyes are now on the upcoming core PCE inflation data release, expected at 8:30 a.m. ET. A hotter-than-expected report could further boost the dollar and exacerbate Bitcoin's current correction, experts say. However, a milder report could bring relief to the options market and create room for a significant price increase, as explained by Maja Vujinovic of FG Nexus. Despite the short-term volatility, Vujinovic sees constructive development in the fourth quarter, driven by demand for spot ETFs and improved liquidity. Magadini shares this long-term optimistic view, suggesting that with the end of the Fed's inflation fight, Bitcoin prices could rise above $250,000. Options data also reflects this optimistic outlook, as shown by brisk buying of call options with expiration dates at the end of the year at $120,000 and $140,000.