$32K Bitcoin price could turn the tides in Friday’s $160M BTC options expiry
Bitcoin may have had a stellar Thursday, but Friday could be the real test of its staying power. $160 million worth of BTC options expire on Friday and many investors are looking for that one big catalyst to cause Bitcoin price to go sky high. The question is what would it take?
The “bitcoin options expiry time” is a term that refers to the last day that an option can be exercised. If the price of bitcoin reaches $32K by Friday, then it could turn the tides in favour for those who shorted bitcoins.
Twenty-three agonizing days have passed since Bitcoin (BTC) last closed above $32,000 and the 10% rally that took place on May 29 and May 30 is currently evaporating as BTC price retraces toward $30,000. The move back to $30,000 simply confirms the strong correlation to traditional assets and in the same period the S&P 500 also retreated 0.6%.
Kraken’s 12-hour Bitcoin/USD pricing. TradingView is the source of this information.
According to Citi economist Jamie Fahy, weaker corporate earnings might put pressure on the stock market owing to increasing inflation and impending interest rate rises by the US Federal Reserve. Citi’s research letter to customers, according to Yahoo! Finance, stated:
“Despite fears about a recession, earnings per share projections for 2022/2023 have remained relatively unchanged.”
In other words, the investment bank anticipates that deteriorating macroeconomic circumstances would cut business profitability, causing investors to reprioritize the stock market downward.
“We should be in some type of recession quite rapidly,” says Jeremy Grantham, co-founder and chief investment strategist of GMO. “Profit margins from a true high have a long way to go.”
As the correlation to the S&P 500 remains incredibly high, Bitcoin investors fear that the potential stock market decline 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 varies from a negative one, indicating that some markets move in opposing ways, to a positive one, indicating that all markets move in the same direction. A value of 0 indicates that there is no link between the two assets.
Currently, the S&P 500 and Bitcoin 30-day correlation stands at 0.88, which has been the norm for the past couple of months.
The majority of bearish bets are below $31,000.
Bears were surprised by Bitcoin’s comeback over $31,000 on May 30 since just 20% of the put (sell) options for June 3 were placed above that price level.
The recent $32,000 resistance test may have deceived bitcoin bulls, as their bets for the $825 million options expiration have risen to $50,000.
Open interest in Bitcoin options for June 3rd. CoinGlass is the source of this information.
Because the put (sell) open interest is at $465 million vs $360 million for call (buy) options, a wider picture using the 0.77 call-to-put ratio suggests greater bearish bets. However, with Bitcoin now trading over $31,000, most negative bets are likely to be worthless.
Only $90 million worth of put (sell) options will be available if Bitcoin’s price stays over $31,000 at 8:00 a.m. UTC on June 3. This discrepancy arises because a right to sell Bitcoin at $31,000 has no value if it trades above that amount upon expiration.
The Bulls may make a $160 million profit.
Based on the present price activity, the four most probable possibilities are shown below. The quantity of call (bull) and put (bear) options contracts available on June 3 fluctuates based on the expiration price. The potential profit is determined by the imbalance favoring either side:
1,100 calls vs. 5,100 puts between $29,000 and $30,000. The total outcome is $115 million in favor of the bears.
4,400 calls vs. 4,000 puts between $30,000 and $32,000. The overall consequence is that the call (buy) and put (sell) instruments are evenly distributed.
6,600 calls vs. 1,600 puts between $32,000 and $33,000. Bulls win $160 million as a consequence of the net outcome.
7,600 calls vs. 800 puts between $33,000 and $34,000. The bulls’ winnings have already reached US$ 225 million.
This rough estimate takes into account call options in bullish wagers and put options in neutral-to-bearish transactions. Despite this, more nuanced investing methods are ignored by this simplicity.
Bears need less margin to keep Bitcoin prices down.
To make a $115 million profit, Bitcoin bearish must push the price below $30,000 on June 3. The bulls’ best case scenario, on the other hand, demands a rise over $33,000 to extend their winnings to $225 million.
According to Coinglass statistics, Bitcoin bears liquidated $289 million in leverage short bets on May 29. As a result, they need less margin to cut the price in the near run.
With this in mind, the most likely outcome is a tie, with Bitcoin trading at $31,000 ahead of the June 3 options expiration.
The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some 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 ride for some time now. If the Ethereum price goes up, it could be a sign that Bitcoin will follow suit.