The put wall was tested, and the put wall held.
we discussed the massive amount of open put interest lingering below the $110,000 level while explaining that it was a pivotal line in the sand for BTC to hold as this week’s draws nearer.
As we see below, it tested the key $110,000 level where all of that negative put gamma was hiding out early in the week, before not only bouncing off of it, but also recovering above its 100-day SMA (blue line, at 112,483) and 50-day SMA (green line, at 114,545).
As we can see below, looking at the daily chart, this is the first time BTC has witnessed consecutive daily closes above its 50-day SMA since the current correction off the all-time highs began in mid-August.
Below we can see how that put-skew, or cost of out-of-the-money puts relative to out of the money calls we discussed last week, reacted to this bullish BTC development as it the cost of puts across expiries quickly fell over the past week from extreme levels of bearishness (5%+) back towards baseline.
What we can gather from this information is that much of BTC’s bullish price action this week can be owed to short positions being closed out following the data we received on Wednesday and Thursday.
That’s a point which is underscored when we take a look at the amount of short perpetual future positions liquidated out of the market in recent days. Looking at the green line on the second chart below we can see that over 1,319 BTC worth ($153mm+) of shorts were forced to buy back their positions during this week’s squeeze. That marks the highest amount of single-week short liquidations since mid-July when BTC first crossed above $120,000.
We can look at this back and forth price action witnessed throughout September as effectively clearing the slate of overleveraged traders in both directions into the FOMC event.
Expect the continued back-and-forth price action to continue in what will likely be another choppy week ahead. Key levels to hold to the downside on any retests lower will be the 50-day and 100-day SMAs discussed earlier, as well as that pivotal put wall still remaining below $110,000.
To the upside $120,000 remains a key level of resistance across options expiries as there are over 18,000 open call contracts at the level currently.
It is also a massive level of resistance in order books currently, as we see below across exchanges, there are over $525 million of resting sell orders placed just above our current $116,000 level.
This tends to suggest we should expect some of those downside targets to come into play early in the week prior to Wednesday’s FOMC.
Their levels will be watching closely for reaction and trading around in the Highstrike Trading Room this week, and I hope to see you there as we look to capture yet another week of exciting crypto price action.
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