Bitcoin Steady Near $31K After Options Expiry; Dollar Index Rises Before Key U.S. Inflation Data

Bitcoin (BTC) and ether (ETH) kept trading within recent price ranges as the expiry of quarterly options and a strengthening dollar index failed to unsettle investors.

At 08:00 UTC, around 150,000 BTC options contracts, worth around $4.5 billion, and 1.2 million ether contracts, worth $2.3 billion, expired on Deribit, the world's leading crypto options exchange. Deribit controls over 85% of global crypto options activity.

The expiry was pivotal, considering market makers in BTC options were "long gamma" and could have added to spot price moves with their hedging activities. The largest cryptocurrency by market value, however, traded listlessly between $30,000 and $31,000 in days leading up to the settlement and remained locked in the narrow range afterward, recording just a 1% gain on the day to $30,700 as of 10:40 UTC, CoinDesk data show.

The so-called max pain point for the June bitcoin options was $26,500. That is the level at which option buyers stand to lose the most at expiration.

Popular theory says the price acts as a magnet in the lead-up to the expiration, with option sellers – usually large traders – trying to push prices to that level to inflict maximum loss on buyers. During the bull market of late 2020 and early 2021, bitcoin consistently gravitated toward max pain point ahead of expiries and resumed gains after the settlement.

With the expiry over, the magnet is gone. So, the cryptocurrencies could resume their upward journies if other factors stay unchanged.

"BTC Max Pain at a significantly reduced level of $26.5K might alleviate the prevailing downward pressure on prices following the expiration," said Luuk Strijers, chief commercial officer at Deribit.

The max pain point for ether June expiry options was $1,700. The native token of Ethereum changed hands at about $1,900 at press time, a 2% gain on the day and the biggest increase in more than a week.

Dollar gains ahead of Core PCE

The dollar index (DXY), which tracks the U.S. currency's value against major peers, including the euro, clocked a two-week high of 103.50 before press time, extending a two-day winning streak triggered by upbeat economic data releases. Notably, the weekly jobless claims figure released Thursday showed the number of Americans filing new claims for unemployment benefits fell last week by the most in 20 months.

On Friday, at 12:30 UTC, the U.S. Bureau of Economic Analysis will release the Federal Reserve’s preferred measure of price pressures, the core personal consumption expenditures price index, or the core PCE deflator.

The data is likely to show the core elements of inflation remain stubborn, strengthening the case for higher-for-longer interest rates in the U.S. and adding to the dollar's strength.

According to economists surveyed by FactSet and published by Barron's, the index is likely to have risen 0.4% month over month in May after April's 0.38% rise. The gain is forecast at 4.7% year on year, unchanged from the previous month.

A rally in DXY typically leads to financial tightening worldwide and risk aversion in markets. However, losses in bitcoin may be moderate this time or short-lived, as the recent spot BTC ETF filings by BlackRock, Invesco and Fidelity have buoyed the crypto market sentiment.

Traders may also take cues from the U.S. personal spending and income figures, which will hit the wires along with the core PCE reading.