Here’s why bears aim to keep Bitcoin under $29K ahead of Friday’s $640M BTC options expiry

The massive bear market that has hit Bitcoin this year is finally coming to an end. There are some huge milestones on the horizon, with expiry of a $640M BTC options in September being one key date investors should keep their eyes peeled for.

The “price target for bitcoin” is a prediction of the price that Bitcoin will be at by the end of Friday. The “Here’s why bears aim to keep Bitcoin under $29K ahead of Friday’s $640M BTC options expiry.”

Bitcoin’s (BTC) daily closing price has been fluctuating in a narrow range between $28,700 and $31,300 over the previous nine days. The May 12 fall of TerraUSD (UST), the third-largest stablecoin by market value, harmed investor confidence, and the route for Bitcoin’s price recovery seems hazy after the Nasdaq Composite Stock Market Index fell 4.7 percent on May 18.

Disappointing quarterly results from top United States retailers are amping up recession fears and on May 18, Target (TG) shares dropped 25%, while Walmart (WMT) stock plunged 17% in two days. The prospect of an economic slowdown brought the S&P 500 Index to the edge of bear market territory, a 20% contraction from its all-time high.

Furthermore, leverage purchasers were hit hard by the latest bitcoin price decline (longs). Between May 15 and May 18, according to Coinglass, total liquidations at derivatives exchanges totaled $457 million.

Bulls put wagers of $32,000 or more.

The open interest for the May 20 options expiration is $640 million, but because bulls were excessively optimistic, the real total will be significantly lower. Bitcoin’s latest drop below $32,000 caught purchasers off guard, and just 20% of May 20 call (buy) options were put below that price level.

Here’s why bears aim to keep Bitcoin under $29K ahead of Friday’s $640M BTC options expiryOpen interest in bitcoin options for May 20. Credit: CoinGlass

The $385 million put (sell) open interest outnumbers the $255 million call (buy) options, resulting in a 0.66 call-to-put ratio. However, with Bitcoin nearing $30,000, most put (sell) bets are anticipated to lose value, lessening the bears’ edge.

Only $160 million worth of put (sell) options will be available if Bitcoin’s price stays over $29,000 at 8:00 a.m. UTC on May 20. This is due to the fact that a right to sell Bitcoin at $30,000 is useless if BTC trades beyond that level at expiration.

Bears would gain from BTC below $29,000.

Based on the present price activity, the three most probable possibilities are shown below. The quantity of call (bull) and put (bear) options contracts available on May 20 vary based on the expiration price. The potential profit is determined by the imbalance favoring either side:

  • 300 calls vs. 7,100 puts between $28,000 and $29,000. The overall outcome is $190 million in favor of the put (bear) instruments.
  • 600 calls vs. 5,550 puts between $29,000 and $30,000. By $140 million, the outcome favors the bears.
  • 1,750 calls vs. 3,700 puts between $30,000 and $32,000. The overall outcome is a $60 million advantage for the put (bear) instruments.

This rough estimate takes into account put options in bearish bets and call options in neutral-to-bullish transactions. Despite this, more nuanced investing methods are ignored by this simplicity.

A trader may, for example, have sold a put option to obtain positive exposure to Bitcoin above a certain price, but there’s no straightforward method to evaluate this impact.

In the medium run, the bulls have nothing to gain.

To make a $190 million profit, Bitcoin bearish must push the price below $29,000 on May 20. The bulls’ best case scenario, on the other hand, demands a surge over $30,000 to limit the damage.

Given that Bitcoin bulls liquidated $457 million in leveraged long positions between May 15 and 18, they should be able to push the price higher with less margin. As a result, bears will attempt to keep BTC below $29,000 ahead of the May 20 options expiration, reducing the chances of a short-term price rebound.

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 is fraught with danger. When making a choice, you should do your own research.

The “btc puts” is a derivative that allows traders to speculate on the price of Bitcoin. Traders are able to buy or sell options contracts for Bitcoin at specific prices and dates. The expiry date for these contracts is Friday, December 21st, 2018. What’s interesting about this option is that it will expire worthless if the price of Bitcoin falls below $29K.

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