Bitcoin (BTC) has been trying to break out of a downtrend for a week and its first attempt on June 16 failed to break through the resistance at $ 22,600. After a second attempt, at $ 21,400 on June 21, the price corrected 8%. After two failed breakouts, the price is currently trading below $ 20,000 and raises questions as to whether the $ 17,600 was actually at the bottom.
The longer BTC takes to break this bearish pattern, the stronger the resistance line becomes and traders follow the upward trend closely. That’s precisely why it’s important for bulls to show their strength as monthly options expire at $ 2.25 billion this week.
Regulatory uncertainty continues to plague cryptocurrency markets after European Central Bank (ECB) President Christine Lagarde expressed her belief that tighter supervision is needed. On 20 June, Lagarde commented on the sector’s betting and lending activities: “ […] lack of regulation often covers fraud, grossly unlawful claims in terms of valuation and often speculation and criminal operations. »
Forcing Bitcoin miners to liquidate their BTC holdings puts further negative pressure on the price of BTC and data from Arcane Research show that publicly traded bitcoin mining companies sold 100% of their BTC production in May, compared to normal 20-40%. in the previous months. In total, the miners hold 800,000 BTC, raising concerns about potential liquidation. The bitcoin price correction has drained the profitability of miners as the cost of production sometimes exceeds their margins.
June 24 options will be extremely scary for investors as bitcoin bears are likely to raise a $ 620 million profit by keeping BTC below $ 20,000.
The bulls placed their bets at $ 40,000 and above
Open interest for the June 24 options expiration is $ 2.25 billion, but the actual figure will be much lower because the bulls were overly supportive. These traders completely lost the mark after BTC fell below $ 28,000 on June 12, but their bullish bets for the expiration of the monthly options extend beyond $ 60,000.
The call / send ratio of 1.70 reflects the open interest surplus of call options of 1.41 billion dollars compared to the call options of 830 million dollars. However, with bitcoin trading below $ 20,000, most bullish bets are likely to become worthless.
If the bitcoin price stays below $ 21,000 at 08:00 UTC on June 24, only 2% of these call options will be available. The reason for this difference is that a right to buy bitcoins at $ 21,000 has no value if bitcoins are trading below that level and are expiring.
Bears keep bulls by the horns
Below are the three most likely scenarios based on the current price action. The number of Bitcoin options contracts available on June 24 for call (bullish) and put (bearish) instruments varies depending on the expiration price. Inequality in favor of all sides equals theoretical profit:
- Between $ 18,000 and $ 20,000: 500 calls compared to 33,100 calls. The net yield in favor of put (bear) instruments is under $ 620 million.
Between $ 20,000 and $ 22,000: 2,800 call options compared to 27,00 send options. The net yield in favor of bears is under $ 520 million.
Between $ 22,000 and $ 24,000: 5,900 call options compared to 26,600 call options. The net yield in favor of put (bear) instruments is about 480 million dollars.
This rough estimate looks at place options used in bearish bets and call options exclusively in neutral or bullish trades. Nevertheless, this oversimplification does not take into account more complex investment strategies.
For example, a trader may have a sell option, which could get a positive exposure for bitcoin above a certain price, but unfortunately there is no easy way to estimate this effect.
A drop of less than $ 20,000 would come as no surprise
Bitcoin Bears must push the price below $ 20,000 on June 24 to make a profit of $ 620 million. On the other hand, the best case scenario for the bulls requires a pump over $ 22,000 to reduce the $ 140 million impact.
The bulls liquidated $ 500 million in long leverage positions on June 12-13, so they should have less margin than needed to push the price higher. Given these data, BTC bears are more likely to pinpoint below $ 22,000 before June 24 options expire.
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