Disclaimer: The opinions expressed by our writers are their own and do not represent the views of U.Today. The financial and market information provided on U.Today is intended for informational purposes only. U.Today is not liable for any financial losses incurred while trading cryptocurrencies. Conduct your own research by contacting financial experts before making any investment decisions. We believe that all content is accurate as of the date of publication, but certain offers mentioned may no longer be available.
"Quad witching," one of the most structurally risky days on the calendar, is approaching for Bitcoin. Neither superstition nor X numerology apply here. The price movement of Bitcoin has already been significantly impacted by this recurrent, derivatives-driven event this year.
Bitcoin's time coming
Four times a year, in March, June, September and December, stock index futures, stock index options, single-stock options and index options all expire simultaneously. This phenomenon is known as quad witching. This corresponds with large BTC options and futures expiries in the cryptocurrency space.
Take a look at the figures. Bitcoin saw a 16.6% decline in March. It dropped an additional 8.5% in June. September's percentage was 7.9%. The same timing, but different market conditions. Every sell-off was in close alignment with quad witching expiries. That is a forced resolution of positioning, not a coincidence.
Bitcoin not great here
As of right now, Bitcoin is already losing ground before the event. Momentum is broken, the price is below important moving averages and recent bounces have ended abruptly. This is significant because quad switching speeds up the direction that already exists rather than creating a new one. The market can push higher when it is robust. It shatters when its weak.
Options gamma and dealer hedging are the true problems. Market makers aggressively unwind hedges when contracts expire. Even tiny changes can result in strong directional pushes if the price is close to big option clusters. Volatility rises, liquidity decreases and stops are quickly pursued. Quad witching days frequently appear chaotic, even in the absence of any news, because of this.
Does that imply a crash of Bitcoin tomorrow? No. However, the danger is not equal. If sellers push, there is very little technical support because Bitcoin is already on a precarious foundation. It would not be shocking if there were a strong flush, particularly if it helped reduce excess leverage before the end of the year.
Ironically, this is also why it is important today and tomorrow. These occasions frequently signify turning points. The flush may function as a reset rather than a breakdown if Bitcoin absorbs it and dumps heavily. However, people are caught off guard when you act as if quad witching is unimportant.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team