Bitcoin Maintains $40K Amid US GDP Report and $5.8B Crypto Options Expiry

• Bitcoin Strives to Consolidate Position Above $40,000 Amid Anticipated U.S. Q4 GDP Data
• Bitcoin's Trading Status
• Early Fed Rate Cuts Reconsidered Amid Inflation Crisis
• Spotlight on Expiry
• Market Recovery and Position Shifting
• Maximum Pain Points for January Expiry Options

Bitcoin Strives to Consolidate Position Above $40,000 Amid Anticipated U.S. Q4 GDP Data

As of Thursday's European trading hours, Bitcoin$42,260 -0.64% (BTC) attempted to secure a position above $40,000. This development took place with the dollar index remaining stable in the lead up to the much-awaited U.S. fourth-quarter gross domestic product (GDP) data.

Bitcoin's Trading Status

At 09:38 UTC, the leading cryptocurrency by market valuation was traded at approximately $40,100. This followed its trial of dip demand in the vicinity of $38,500 earlier in the week. Meanwhile, the dollar index, which measures the US dollar's value against other major fiat currencies, steadied around 103.70, a decrease from the highs of approximately 103.82 achieved on Monday.

Early Fed Rate Cuts Reconsidered Amid Inflation Crisis

Traders have been reassessing the likelihood of early Fed rate cuts in the wake of the ongoing inflation crisis in the Red Sea region. Current indications from the Fed funds futures suggest a 50% probability of a Fed rate cut in March, a reduction from the 80% chance predicted a month prior.

There may be additional adjustments later today, following the announcement of the U.S. GDP data at 13:30 UTC. Forecasts stipulate that the data will reveal a 2% seasonally adjusted annualized pace for the world's largest economy's GDP in the final quarter of 2023. This is a downgrade from the 4.9% seen in Q3, and the lowest since Q2 of 2022, according to predictions from CNBC.

Spotlight on Expiry

On Friday at 08:00 UTC, bitcoin options worth $3.75 billion and Ether options worth $2.07 billion are set to expire on Deribit, the global leader in crypto options exchange, corresponding to over 85% of global activity.

Market Recovery and Position Shifting

In the lead up to the options expiry, it has become apparent that the market is slowly recovering from the initial impact of the ETF introduction and GBTC unwind. Lukk Strijers, Chief Commercial Officer at Deribit, has noted a rise in call-put skew from an earlier low, indicating a shift in market sentiment. Traders have begun to roll their positions from January expiry contracts to February expiry contracts, Strijers revealed.

Maximum Pain Points for January Expiry Options

Data indicates that for bitcoin's January expiry options, the maximum pain point is $41,000, whereas for Ether, it is $2,300. The maximum pain point refers to the level where options buyers could face the highest losses upon expiry. In traditional markets, the theory suggests that options sellers, usually well-capitalised institutions, try to edge the underlying spot market closer to the maximum pain point before expiry to inflict maximum damage on buyers.

Edited by Jonathan Stoker