A record 5 million BTC in options open interest and key on-chain levels could cause volatility.
On-chain data indicates a complex mix of signals for Bitcoin’s price following the Federal Reserve’s interest rate decision on Thursday.
According to a new analysis report from on-chain data platform Glassnode, it is critical for Bitcoin’s price to hold above $115,200. The firm warns that a failure to do so could lead to a drop to $105,500.
Glassnode’s data shows that fears of a major price decline have lessened since the Fed’s announcement. While the spot market showed some minor selling pressure, risk-off positions in the derivatives market noticeably increased.
Open interest in the perpetuals market has slightly decreased. Glassnode noted that open interest, which had peaked at 3.95 million BTC, has now dropped to 3.78 million BTC. An analysis of liquidation data shows that while short positions were squeezed just before the rate announcement, the proportion of long position liquidations increased after the rate cut.
The potential for major volatility remains, however, as the open interest in the options market has hit a record high of 5 million BTC. A record amount of these options are set to expire next Friday, on September 26.
Glassnode suggests paying close attention to the Bitcoin options’ “max pain” price. With both a price increase and decrease on the table, a large-scale liquidation event on either side could have a significant impact on the spot price.
The current max pain price for long positions is $112,700, while for short positions it’s $121,600. As of this article’s writing, Bitcoin’s price is fluctuating around $116,990.
Most of the Bitcoin traded on-chain since the September FOMC has been above $115,200. Glassnode states that maintaining this price level is key to preserving momentum, while losing it risks a drop to $105,500.
Ultimately, staying above $115,200 would maintain demand-driven momentum, while a drop below that level risks a retraction into the $105,500 to $115,200 range. Glassnode concludes that a comprehensive look at the on-chain signals suggests that market participants may be in a state of waiting for Bitcoin’s direction to be decided.
