Bitcoin bulls may ignore Friday’s $730M options expiry by saving their energy for $40K

The past few months have been less than pleasant for Bitcoin (BTC) bulls, but they are not alone. Persistent comments from the United States Federal Reserve hint at plans to raise interest rates in 2022 and thi is causing investors to seek protection in inflation-protected bonds.

The monetary authority signaled its intention to substantially raise the benchmark interest rate and they will also gradually reduce the monthly purchase of debt assets.

Even though some crypto investors deem Bitcoin digital scarcity as inflationary protection, that does not change its volatility. In turn, it causes the asset price to move in tandem with risk markets.

Bitcoin price at Coinbase, USD (right) vs. Russell 2000 index (left)

The above chart shows Bitcoin price in blue stacked against the smaller U.S. listed companies, as measured by the Russell 2000 equity markets index. Unlike the S&P 500 or Dow Jones Industrial Index, this benchmark excludes those tech giants. Thus, the smaller companies are usually considered riskier and are more impacted when investors fear an economic downturn.

However, the negative performance did not scare investors as the Canada-based Purpose Bitcoin ETF attracted over $38 million worth of Bitcoin this Tuesday, its third-largest daily inflow to date. The fund now holds 31,032 BTC, equivalent to $1.2 billion.

Regardless of investors’ sentiment, Bitcoin bulls could face a $120 million loss if BTC price moves below $36,000 on Friday’s options expiry.

$730 million in options expire on Feb. 4

According to Friday’s options expiry open interest, Bitcoin bulls placed heavy bets between $40,000 and $44,000. These levels might seem optimistic right now, but Bitcoin was trading above $42,000 two weeks ago.

Bitcoin options aggregate open interest for Feb. 4. Source: Coinglass.com

At first sight, the $430 million call (buy) options dominate the $300 million put (sell) instruments, but the 1.43 call-to-put ratio does not really tell the whole story. For example, the 14% price drop over the past two weeks wiped out most bullish bets.

A call option gives the buyer a right to buy BTC at a fixed price at 8:00 am UTC on Feb. 4….

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