There are 3 reasons for bears trying to pin bitcoin under $ 30,000 for this week’s BTC options to expire

Investors were surprised when the price of Bitcoin (BTC) fell to $ 25,500 on May 12, and this shock extended to options traders. The strong correction was not limited to cryptocurrencies and some large cap stocks faced 25% or heavier weekly losses in the same period.

Investors were surprised when the price of bitcoin (BTC) fell to $ 25,500 on May 12, and that shock spread to options traders. The sharp correction was not limited to cryptocurrencies and some large cap stocks suffered weekly losses of 25% or more during the same period.

S&P 500 members like Illumina (ILMN), which have been down 27% in the last seven days, are affected by growing economic uncertainty, while Caesars Entertainment (CZR) has declined 25%. Shopify (SHOP), one of Canada ‘s largest ecommerce companies, has grown in stock by 28%.

Traders are scratching their heads and wondering if this volatility is due to a tightening of the US Federal Reserve. The monetary authority raised interest rates and also reaffirmed its intention to sell bonds and debt instruments.

While this may be the case, traders should keep in mind that the stock market increased by 113% between 2017 and 2021, as reflected in the S&P 500 index. on excessive valuations and overconfidence on the part of the country. investors.

Fortunately, not everything was negative for bitcoin. On May 10, Townsquare Media, a New York-based digital marketing company and radio station, unveiled a $ 5 million bitcoin investment. Nubank, the largest digital bank in Brazil and Latin America, has also announced that it will allocate about 1% of its net assets to Bitcoin.

Fortunately, not everything is negative for Bitcoin. On May 10, Townsquare Media, a New York-based digital marketing company and radio station, unveiled a $ 5 million Bitcoin investment. Nubank, the largest digital bank in Brazil and Latin America, also announced that it would allocate about 1% of its net assets to Bitcoin.

The bulls were taken by surprise

Bitcoin’s fall to $ 25,500 on May 12 surprised the bulls as less than 1% of call option bets for May 13 were placed below this price level.

The bulls may have been misled by the recent attempt to break above $ 40,000 on May 4, as their pledges for the $ 610 million options on May 12 have largely concentrated over $ 34,000.

A broader view using the call-to-put ratio of 0.90 shows a slight advantage for the $ 320 million options placed (sold) over the $ 290 million call (buy) instruments. But now that bitcoin is below $ 30,000, most bullish bets will become worthless.

If the bitcoin price stays below $ 30,000 at 8 am UTC on May 13, these call options will only be available for up to $ 1 million. This difference is explained by the uselessness of the right to buy bitcoin at $ 30,000 if it is trading below this expiring level.

The Bears are targeting a $ 260 million profit.

The three most likely scenarios based on current price action are listed below. The number of option contracts available on May 13 for call (bullish) and put (bearish) instruments varies depending on the expiration price. The inequality in favor of all sides equals the theoretical profit:

• Between $ 27,000 and $ 30,000: 0 calls against 9,350 put. Net income (instruments) prefers $ 260 million.
  Between $ 30,000 and $ 32,000: 150 call options compared to 7,500 call options. The net yield in favor of bearish instruments is under $ 220 million.
  Between $ 32,000 and $ 33,000: 1,100 call options compared to 5,900 add options. The net yield in favor of (bear) options is under $ 150 million.

This rough estimate looks at placing options used in bearish bets and call options exclusively in bullish neutral 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.

Bears are interested in lowering the price of bitcoin

Bitcoin Bears must keep the price below $ 30,000 on May 13 to make a profit of $ 260 million. On the other hand, the best case scenario requires a 10.7% gain between the current $ 28,900 area and $ 32,100 to limit their loss to $ 150 million.

The bulls have liquidated $ 1.73 billion in long leverage positions over the past three days, so they are likely to have fewer resources to push the price higher in the short term. That said, the BTC bears are likely to earn less than $ 30,000 before the May 13 options expire.

These are just the views and opinions expressed herein the author and do not necessarily represent those of Cointelegraph. All investment and business transactions involve risk. You should do your own research before making a decision.