Bitcoin's Bullish Shift Challenges Max Pain Theory as Dominance Rises

Bitcoin's dominance in the cryptocurrency market is showing signs of increasing, which could signal a potential shift in investor sentiment toward the leading digital asset. On September 9, 2025, Bitcoin (BTC) reached $113,000, its highest level since August 28, according to CoinDesk data [1]. This price movement represents the first higher high since the mid-August peak of $124,000 and suggests a possible bullish reversal in the short-term trend. Concurrently, Bitcoin’s market dominance, defined as its share of the total cryptocurrency market, rose to a two-week high of nearly 59%, up from a recent low of 57.5%. This increase indicates a return of capital flows into Bitcoin, contrasting with earlier patterns where large investors rotated out of BTC and into other assets like Ethereum [1].

The market dynamics around Bitcoin’s recent performance have drawn attention to the influence of options expiry. On the same day, Bitcoin options worth $3.28 billion expired on the Deribit platform, with the max pain level set at $112,000 [1]. This is the price point where options buyers would face the largest losses. According to the max pain theory, as expiration approaches, option sellers—often institutional actors—may attempt to push the spot price toward this level, thereby maximizing the losses of buyers. Bitcoin’s price movement above $112,000 prior to the expiry aligns with this theory, suggesting a potential strategy by large players to influence market outcomes.

While the max pain theory is well-established in traditional financial markets, its applicability to the Bitcoin market remains a subject of debate. Some market analysts argue that the theory has limited predictive power in the crypto space due to the market's unique volatility and speculative nature [1]. Nonetheless, the recent price behavior around the Deribit options expiry offers a compelling example of how institutional activity may influence short-term price movements in the cryptocurrency market.

Looking ahead, traders are closely monitoring the U.S. jobs report, scheduled for release at 8:30 ET, as a potential catalyst for further price movements. A weaker-than-expected report could increase speculation around future Federal Reserve rate cuts, which historically have supported risk-on sentiment and could benefit the broader cryptocurrency market [1]. If Bitcoin continues to outperform other assets, it could signal a broader reallocation of capital from altcoins back into BTC, which would have implications for the performance of altcoins like Ethereum.

The recent rally in Bitcoin and the potential shift in market dynamics highlight the ongoing interplay between macroeconomic factors and investor behavior in the cryptocurrency space. As the market continues to evolve, the balance between Bitcoin and altcoins will remain a key focus for investors and analysts alike.

Source: [1] Bitcoin Hits $113K as BTC Dominance Approaches Two ... (https://finance.yahoo.com/news/bitcoin-hits-113k-btc-dominance-083413261.html)