This is why Bears wants to keep bitcoin below $ 29K before $ 640M BTC options expire on Friday

This is why Bears wants to keep bitcoin below $ 29K before $ 640M BTC options expire on Friday

Over the past nine days, the daily closing price of bitcoin (BTC) has fluctuated in a narrow range between $ 28,700 and $ 31,300. The May 12 fall of TerraUSD (UST), previously the third most stablecoin by market capitalization, had a negative impact on investor confidence and the bitcoin price recovery path following a 4.7% fall on the Nasdaq Composite Stock Index on May 18 .

Disappointing quarterly results from major U.S. retailers increase fears of a recession, and on May 18, Target (TG) shares fell 25%, while Walmart (WMT) shares fell 17% in two days. The S&P 500 index has pushed the S&P 500 index to the edge of the bear market due to an economic slowdown, down 20% from an all-time high.

In addition, the (long) leverage cost of buyers has been falling recently in the price of cryptocurrencies. According to Coinglass, global liquidations reached $ 457 million in derivatives markets between May 15 and May 18.

The bulls bet $ 32,000 and more.

The open interest for the May 20 options expiration is $ 640 million, but the actual figure will be much lower because the bulls were overly supportive. The recent withdrawal of Bitcoin below $ 32,000 surprised buyers and only 20% of call options for May 20 were placed below this price level.

Global interest bitcoin options open for May 20th. Source: CoinGlass

The call-to-put ratio, currently 0.66, reflects the open interest surplus on the put (sell) options of $ 385 million compared to the call (call) options of $ 255 million. However, because bitcoin is located near $ 30,000, most of the bets placed are likely to become worthless, reducing the bear ‘s edge.

If the bitcoin price stays above $ 29,000 at 8 am UTC on May 20, these options will only be available for up to $ 160 million. The reason for this difference is that the right to sell bitcoin for $ 30,000 is not worth it if bitcoin is trading above that expiring level.

Bears reportedly wanted to capitalize on a BTC price below $ 29,000

Below are the three most likely scenarios based on the current price trend. The number of option contracts available on May 20 for call (bullish) and put (bearish) instruments varies depending on the expiration price. Inequality in favor of all sides equals theoretical profit:

  • Between $ 28,000 and $ 29,000 : 300 calls against 7,100 put. The net yield in favor of put (bear) instruments is under $ 190 million.
  • Between $ 29,000 and $ 30,000 : 600 call options compared to 5,550 add options. The net return in favor of the bears is $ 140 million.
  • Between $ 30,000 and $ 32,000 : 1,750 call options for 3,700 call options. The net yield is in favor of the short (bearish) instruments of $ 60 million.

This rough estimate looks at placement 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.

Bulls have little to gain in the short term

Bitcoin Bears will have to push the price below $ 29,000 on May 20 to make a $ 190 million profit. On the other hand, in the best case scenario for the bulls, a pressure of over $ 30,000 is required to minimize the damage.

Since the bulls liquidated $ 457 million in long leverage positions between May 15 and May 18, they should need fewer margins to push the price higher. So the bears will try to keep BTC below $ 29,000 before the May 20 options expire, reducing the chances of a near – term price recovery.

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.

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