Bitcoin may have had a great Thursday, but Friday could be the real test of its stamina. $160 million worth of BTC options will expire on Friday and many investors are looking for that one big catalyst to send Bitcoin price skyrocketing. The question is what would it take?
The “expiration time of bitcoin options” is a term that refers to the last day an option can be exercised. If the price of bitcoin hits $32K by Friday, it could turn the tide in favor of those who have shorted bitcoins.
Twenty-three painful days have passed since Bitcoin (BTC) last closed above $32,000 and the 10% rally that occurred on May 29 and May 30 is currently evaporating as BTC price bounces back to $30,000. The move back to $30,000 simply confirms the strong correlation with traditional assets, and the S&P 500 also fell 0.6% over the same period.
Kraken’s 12 Hour Bitcoin/USD Prices. TradingView is the source of this information.
According to Citi economist Jamie Fahy, weaker corporate earnings could put pressure on the stock market due to rising inflation and impending rate hikes by the US Federal Reserve. Citi’s research letter to customers, according to Yahoo! Finance, stated:
“Despite fears of a recession, earnings per share forecasts for 2022/2023 have remained relatively unchanged.”
In other words, the investment bank expects deteriorating macroeconomic conditions would reduce corporate profitability, causing investors to down-prioritize the stock market.
“We should be in some kind of recession pretty soon,” said Jeremy Grantham, GMO’s co-founder and chief investment strategist. “Profit margins from a real high still have a long way to go.”
As the correlation with the S&P 500 remains incredibly high, Bitcoin investors fear that the potential decline in the stock market will inevitably lead to a retest of the $28,000 level.
S&P 500 and Bitcoin/USD 30-day correlation. Source: TradingView
The correlation measure ranges from a negative, indicating that some markets are moving in opposite directions, to a positive, indicating that all markets are moving in the same direction. A value of 0 indicates that there is no relationship between the two assets.
Currently, the 30-day S&P 500 and Bitcoin correlation stands at 0.88, which has been the norm for the past few months.
Most bearish bets are below $31,000.
Bears were surprised by Bitcoin’s comeback above $31,000 on May 30, as only 20% of put (sell) options were placed above that price level before June 3.
The recent $32,000 resistance test may have tricked bitcoin bulls, as their options expiration bets rose from $825 million to $50,000.
Open interest in Bitcoin options for June 3. CoinGlass is the source of this information.
Since the open put (sell) rate is $465 million versus $360 million for call (buy) options, a broader view using the 0.77 call-to-put ratio suggests larger bearish bets. However, with Bitcoin now trading over $31,000, most negative bets are probably worthless.
There are only $90 million in put (sell) options available if Bitcoin’s price remains above $31,000 on June 3 at 8:00 AM UTC. This discrepancy arises because a right to sell Bitcoin for $31,000 has no value if it trades above that amount on expiration.
The Bulls can make a profit of $160 million.
Based on current price activity, the four most likely possibilities are listed below. The amount of call (bull) and put (bear) option contracts available on June 3 fluctuates based on the expiration price. The potential gain is determined by the imbalance that favors both parties:
- 1,100 calls versus 5,100 places between $29,000 and $30,000. The total result is $115 million in favor of the bears.
- 4,400 calls versus 4,000 places between $30,000 and $32,000. The general consequence is that the call (buy) and put (sell) instruments are evenly distributed.
- 6,600 calls vs 1,600 places between $32,000 and $33,000. Bulls win $160 million as a result of net outcome.
- 7,600 calls versus 800 places between $33,000 and $34,000. The bulls’ profit has already reached US$225 million.
This rough estimate takes into account call options in bullish bets and put options in neutral to bearish trades. Despite this, more nuanced investment methods are ignored by this simplicity.
Bears need less margin to keep Bitcoin prices low.
To make a profit of $115 million, Bitcoin bearishly needs to push the price below $30,000 on June 3. The bulls’ best-case scenario, on the other hand, requires an increase of over $33,000 to extend their profits to $225 million.
According to Coinglass stats, Bitcoin Bears liquidated $289 million in leveraged short bets on May 29. As a result, they need less margin to lower the price in the short term.
With this in mind, the most likely outcome is a draw, with Bitcoin trading at $31,000 ahead of the options expiration on June 3.
The thoughts and opinions of the author are purely his or hers and do not necessarily reflect those of Cointelegraph. Every investment and trading decision comes with a certain level of risk. When making a choice, you should do your own research.
The “ethereum price” is the most popular cryptocurrency in the world. The “Bitcoin price” has been on a roller coaster for a while now. If the Ethereum price rises, it could be a sign that Bitcoin will follow.
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