Bitcoin Derivatives Data Predicts BTC Price Below $30K Heading to Friday’s $800M Options Expiration

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

Fleeting optimism returned to the sellers market on June 1 after BTC dropped 7.6% in less than six hours and priced below $30,000. The negative move coincided with the US Federal Reserve starting the process of reducing its $9 trillion balance sheet.

On June 2, former BitMEX CEO Arthur Hayes argued that Bitcoin’s May bottom could have been a strong signal. Using on-chain data, Hayes predicts strong support at $25,000, as $69,000 marked this cycle’s all-time high, down 64%.

While analysts may issue bullish price forecasts, the threat of regulation continues to limit investor optimism and another blow came on June 2 when the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against Gemini Trust Co for allegedly misleading statements in 2017 regarding the self-certification valuation of a Bitcoin futures contract.

On June 7, a bill to ban digital assets as payment was introduced in the Russian parliament. The bill freely defines digital financial assets as “electronic platforms”, which can be recognized as subjects of the national payment system and required to submit to central bank registration.

Bulls placed their bets at $32,000 and above

Open interest for the options expiration on June 10 is $800 million, but the actual number will be much lower as the bulls have been overly bullish. These traders may have been fooled by the short-lived pump to $32,000 on May 31, because their bets for Friday’s options expiration extend up to $50,000.

Bitcoin Options Add Open Interest for June 10. Source: CoinGlass

The call-to-put ratio of 0.94 shows the balance between the open buy (buy) interest of $390 million and the put (put) options of $410 million. Bitcoin is currently close to $30,000, which means that most bullish bets are likely to turn out to be worthless.

If the Bitcoin price drops below $30,000 at 8:00 UTC on June 10, only $20 million of these call (buy) options will be available. This difference happens because the right to buy Bitcoin for $30,000 is useless if BTC trades below that level at expiration.

Bears aim below $29,000 to profit $205 million

Below are the four most likely scenarios based on current price action. The number of options contracts available on June 10 for the call (bull) and put (bear) instruments varies according to the expiration price. The imbalance that favors each side constitutes the theoretical profit:

  • Between $28,000 and $29,000: 50 calls against 7,400 puts. The net result favors put instruments (bear) by US$ 205 million.
  • Between $29,000 and $30,000: 700 calls against 5,500 puts. The net result favors the bears by $140 million.
  • Between $30,000 and $32,000: 3,700 calls against 3,400 puts. The net result is balanced between bulls and bears.
  • Between $32,000 and $33,000: 7,700 calls vs. 750 puts. The net result favors purchase instruments (bull) at US$ 220 million.

This gross estimate considers put options used in bearish bets and call options exclusively in neutral to bullish trades. Even so, this oversimplification ignores more complex investment strategies.

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

Related: ‘Can it get any easier?’ Bitcoin whales dictate when to buy and sell BTC

Bulls will try to fix BTC above $30,000

Bitcoin bulls need to push the price above $30,000 on June 10 to avoid a $140 million loss. On the other hand, the bears’ best-case scenario requires pressure below $29,000 to maximize their gains.

Bitcoin bulls had $200 million leverage long positions liquidated on June 6, so they should have less margin needed to drive the price higher. With that said, the bears will no doubt try to suppress BTC below $30,000 before the options expire on June 10.

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