Bitcoin derivatives data forecasts sub-$30K BTC price heading into Friday’s $800M options expiry

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Bitcoin (BTC) briefly broke above $32,000 on May 31, but the excitement lasted less than four hours after the resistance proved harder than expected. The $32,300 level represents a 20% increase from the May 12 low of $27,000 and has provided the bulls with much needed hope to buy some $34,000 and higher call options.

Fleeting optimism returned to sellers’ markets on June 1 after BTC dropped 7.6% in less than six hours and set a price below $30,000. The negative move coincides with the United States Federal Reserve beginning the process of shrinking its $9 trillion balance sheet.

On June 2, Arthur Hayes, former CEO of BitMEX exchange, argued that bitcoin’s May lows could be a strong signal. Using on-chain data, Hayes predicted a strong support at $25,000, noting that $69,000 marked an all-time high of this cycle, a decline of 64%.

Even though analysts may issue rosy price predictions, the threat of regulation is limiting investors’ optimism and another setback came on June 2 when the US Commodity Futures Trading Commission (CFTC) filed suit against Gemini Trust Company in 2017 for alleged misleading statements regarding self-certifying valuations of bitcoin futures contracts.

On June 7, a bill to ban digital assets as a form of payment was introduced in the Russian Parliament. The bill loosely defines digital financial assets as “electronic platforms” that can be recognized as subjects of a national payment system and obliged to be deposited in a central bank registry.

Bulls place their bets on $32,000 and above

The open interest for the options expiration of June 10 is $800 million, but the actual figure will be much lower as the bulls were overly optimistic. These traders may have been fooled by the short-term pump to $32,000 on May 31 as their bets rise to $50,000 for Friday’s options expiration.

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Bitcoin options total open interest for June 10th. Source: CoinGlass

The 0.94 call-to-put ratio reflects the balance between the $390 million call (buy) open interest and the $410 million put (sell) options. Currently, Bitcoin is near $30,000, which means that most bullish bets may turn out to be worthless.

If the price of bitcoin breaks below $30,000 on June 10 at 8:00 AM UTC, only $20 million worth of these call options will be available. This difference occurs because the right to buy bitcoin for $30,000 is void if BTC trades below that level at expiration.

Bears aim for sub-$29,000 to $205 million profit

Below are the four most likely scenarios based on current price action. The number of options contracts available on June 10 for call (bull) and put (bear) instruments varies depending on the expiration price. The imbalance in favor of each of the parties constitutes the theoretical advantage:

  • Between $28,000 and $29,000: 50 calls vs 7,400 puts. The net result is in favor of put (bear) equipment by $205 million.
  • Between $29,000 and $30,000: 700 call vs 5,500 put. The net result is $140 million in Bear’s favor.
  • Between $30,000 and $32,000: 3,700 call vs 3,400 put. The net result is balanced between bulls and bears.
  • Between $32,000 and $33,000: 7,700 call vs 750 put. Net result supports $220 million by call (bull) instruments.

This crude estimate considers put options used in bearish bets, and especially call options in neutral-to-bullish trades. Still, this over-simplification disregards more complex investment strategies.

For example, a trader could sell a put option, effectively gaining positive exposure for bitcoin above a specific price, but unfortunately, there is no easy way to estimate this effect.

related: ‘Could it be easier?’ Bitcoin whales decide when to buy and sell BTC

Bulls Will Try to Keep BTC Above $30,000

Bitcoin bulls need to push the price above $30,000 on June 10 to avoid a loss of $140 million. On the other hand, bearish best case requires downside pressure below $29,000 to maximize its gains.

Bitcoin bulls only had $200 million of leveraged long positions on June 6th, so they should have less margin needed to propel the price. Simultaneously, the bears will undoubtedly try to push BTC below $30,000 before the option expires on June 10.

The views and opinions expressed here are solely those of Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.