Core Insights - The cryptocurrency market is facing a critical test this week due to the quarterly options expiry coinciding with a key U.S. inflation reading, which could influence the momentum of the current rally [1] - Approximately $22.3 billion in crypto options are set to expire, with Bitcoin options accounting for a notional value of $17.06 billion [1] Options Market Dynamics - The current Bitcoin expiration cycle is noted as the largest on record, with significant dealer positioning indicating a lot of short gamma at price levels of $109,000 and $108,000 [2] - A short gamma position could lead to forced selling in a declining market, potentially exacerbating price drops [3] Price Levels and Predictions - The $108,000 price level is critical for Bitcoin traders; failing to maintain this level could trigger automated selling, independent of inflation data [3] - If Bitcoin drops below $108,000, it could lead to a significant price move down to $96,000, especially in a weak market [4] Inflation Impact - The Core PCE release is highly anticipated, with expectations of a month-over-month increase of around 0.2%, slightly lower than the previous month's 0.3% [5] - A stronger-than-expected inflation report could strengthen the dollar and worsen Bitcoin's correction, while a softer report could allow for a sharp upside move [5] Market Outlook - Despite short-term volatility around inflation reports, a constructive fourth quarter is expected for crypto markets, driven by demand for spot exchange-traded funds and improving liquidity [6]