Bitcoin (BTC) briefly crossed $ 32,000 on May 31, but the tension lasted less than four hours after the resistance level proved to be more difficult than expected. The $ 32,300 level represented a 20% increase from the May 12 swing to $ 27,000 and gave bulls the necessary hope of buying about $ 34,000 and higher stock options.
The fleeting optimism returned to the sellers’ market on June 1, after BTC shed 7.6% in less than six hours and set the price below $ 30,000. The negative move coincided with the start of the US Federal Reserve’s process of reducing its $ 9 trillion balance sheet.
On June 2, Arthur Hayes, former CEO of the BitMEX exchange, argued that the Bitcoin bottom in May could have been a strong signal. Using data on the chain, Hayes predicts strong support at $ 25,000, given that the $ 69,000 market peaked this round from the beginning, a 64% reduction.
Even though analysts could issue bright price forecasts, the threat of regulation continues to limit investor optimism and another shock came on June 2 when the US Commodities Futures Commerce Committee (CFTC) sued Gemini Trust Co. for alleged misleading statements in 2017 regarding self-certification assessment of Bitcoin futures contract.
On June 7, a bill was introduced in the Russian parliament banning digital assets as payment. The bill loosely defines digital financial assets as an “electronic platform”, which can be recognized as a subject of the domestic payment system and must be submitted to the Central Bank Register.
The Bulls placed their bets at $ 32,000 and up
The open interest rate for the option on June 10 expires is $ 800 million, but the actual figure will be much lower as the bulls were too optimistic. These traders may have been deceived by the short-term pump up to $ 32,000 on May 31 because their bets for Friday’s options expire up to $ 50,000.
The 0.94 buy-to-sell ratio shows the balance between $ 390 million open interest (buy) and $ 410 million sale (sell) options. Bitcoin is currently close to $ 30,000, which means that most bullish bets are likely to be worthless.
If the price of Bitcoin falls below $ 30,000 at 8:00 UTC on June 10, only $ 20 million worth of these (buy) calls will be available. This difference occurs because the right to buy Bitcoin at $ 30,000 is useless if BTC trades below that level when it expires.
Bears is aiming for under $ 29,000 to make a profit of $ 205 million
Below are four most likely situations based on current pricing action. The number of option contracts available on June 10 for the purchase (bull) and sale (bear) of instruments varies, depending on the depreciation price. The imbalance in favor of each party forms a theoretical gain:
- Between $ 28,000 and $ 29,000: 50 calls against 7,400 sets. Net income supports the sale of bear instruments by USD 205 million.
- Between $ 29,000 and $ 30,000: 700 calls against 5,500 sets. The net profit of the bears is about 140 million dollars.
- Between $ 30,000 and $ 32,000: 3,700 calls against 3,400 sets. The result is a balance between bulls and bears.
- Between $ 32,000 and $ 33,000: 7,700 calls against 750 sets. The net result supports call (bull) instruments around 220 million dollars.
This rough estimate takes into account put options used in bearish betting and call options only in neutral to bullish trades. Nevertheless, this oversimplification avoids more complex investment methods.
For example, a trader may have sold a put option and actually received a positive risk for Bitcoin above a certain price, but unfortunately there is no easy way to assess this effect.
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The Bulls will try to fix BTC over $ 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 position requires pressure below $ 29,000 to maximize their profits.
Bitcoin bulls recently had $ 200 million in indebted long positions available on June 6, so they should have the smaller margin needed to raise the price. With that said, Bears will no doubt try to suppress BTC below $ 30,000 before the June 10 options expire.
The views and opinions expressed herein are theirs alone author and do not necessarily reflect the views of Cointelegraph. Every investment and business involves risk. You should do your own research when making a decision.
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