Here's why bears aim to keep Bitcoin below $ 29K before $ 640M BTC options expire on Friday

Here’s why bears aim to keep Bitcoin below $ 29K before $ 640M BTC options expire on Friday – Mail Bonus

Over the past nine days, the daily closing price of Bitcoin (BTC) has fluctuated between $ 28,700 and $ 31,300. The collapse of TerraUSD (UST), formerly the third largest stablecoin in terms of market value, on May 12, negatively affected investor confidence and the path to Bitcoin recovery seems unclear after the Nasdaq Composite Stock Market Index fell 4.7% on May 18. .

Weak quarterly results from major US retailers boost fears of a contraction, and on May 18 shares of Target (TG) fell 25%, while Walmart (WMT) shares fell 17% in two days. The outlook for a contraction in the economy brought the S&P 500 index to the limit of the bear market, which is a 20% contraction from an all-time high.

In addition, the recent decline in cryptocurrency prices has been costly for long-term buyers. According to Coinglass, the total winding-up proceedings reached $ 457 million in derivatives trading between May 15 and 18.

The Bulls placed a bet of $ 32,000 and above

The open interest rate for the options expiring on May 20 is $ 640 million, but the actual figure will be much lower as the bulls were too optimistic. Bitcoin’s recent downturn below $ 32,000 came as a surprise to buyers and only 20% of options (buy) before May 20 have been put below that price level.

Bitcoin options gather open interest rates before May 20th. Source: CoinGlass

The ratio of 0.66 reflects the superiority of $ 385 million in open interest against the $ 255 million option. However, since Bitcoin is close to $ 30,000, most set (sell) bets are likely to be worthless, which reduces the bears’ advantage.

If Bitcoin’s price stays above $ 29,000 at 8:00 UTC on May 20, only $ 160 million worth of these (selling) options will be available. This difference occurs because the right to sell Bitcoin at $ 30,000 is worthless if BTC trades above that level when it expires.

Under- $ 29K BTC would benefit bears

Below are three most likely situations based on current pricing action. The number of option contracts available on 20 May 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: 300 calls against 7,100 sets. Net income supports the sale of bear instruments by USD 190 million.
  • Between $ 29,000 and $ 30,000: 600 calls against 5,550 sets. The net profit of the bears is about 140 million dollars.
  • Between $ 30,000 and $ 32,000: 1,750 calls against 3,700 sets. Net income supports the sale of bear instruments by $ 60 million.

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.

Cattle have little to work for a short time

Bitcoin bears need to push the price below $ 29,000 on May 20 to secure a $ 190 million profit. On the other hand, the best case scenario of the bulls requires pushing over $ 30,000 to minimize the damage.

Given that Bitcoin bulls had $ 457 million in indebtedness in a long-term position that was liquidated between May 15 and 18, they should have a smaller margin needed to raise the price. Thus, the bears will try to suppress BTC below $ 29,000 before the options expire on May 20, reducing the likelihood of a short-term price improvement.

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.