The June 30 expiry of $4.7 billion worth of Bitcoin (BTC) monthly options could play a crucial role in whether the $30,000 price consolidates as long-term support and opens up room for further upside momentum becomes.
Why Is Bitcoin Breaking Yearly Highs?
Many analysts believe Bitcoin’s recent breakout above $27,000 is a bet on multiple Bitcoin exchange-traded fund (ETF) applications, including those from BlackRock and ARK Invest.
The news also fueled expectations that Grayscale may convert its Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF.
$31,000 limits bitcoin price increases for now
On the other hand, bitcoin bears will seek to exploit macroeconomic and regulatory headwinds, including exchanges enacting mandatory Know Your Customer (KYC) procedures.
On June 28, KuCoin announced the upcoming update of the KYC system to improve compliance with global anti-money laundering regulations.
Additionally, there is increasing concern about the impact of miner selling pressure as the network hashrate has reached 400 exahashes per second. Analytics firm Glassnode noted that miners sent a record $128 million in sales to exchanges over the past week. Curiously, the move mimics the spikes seen during the 2021 bull market as miners took profits.
Furthermore, during the European Central Bank’s forum in Portugal, Federal Reserve (Fed) Chairman Jerome Powell warned that most policymakers expect two more rate hikes this year. According to the CME FedWatch Tool, investors are pricing in an 82 percent probability of a 25 basis point rate hike on July 26th.
Four-hour Bitcoin price movements during options expiration. Source: TradingView
Bitcoin price last flirted with $31,000 on June 27, but resistance proved stronger than expected. Subsequent correction to $30,000 supports the thesis of near-term sideways trading as investors gauge the impact of additional rate hikes by the Fed.
Such a restrictive scenario for the global economy could explain why some bitcoin traders decided to take profits, which limited the price rise.
$4.7 billion out of reach as bulls overly optimistic
The open interest for the June 30 option expiration is $4.7 billion, but the actual number will be lower as the bulls were expecting the price level to be $32,000 or higher. These traders became overly optimistic after bitcoin price surged 25.5% between June 15 and June 23 and tested the $31,000 resistance.
Deribit bitcoin options aggregate open positions for June 30th. Source: Deribit
The put-to-call ratio of 0.56 reflects the imbalance between the $3.1 million outstanding call (call) options and the 1.7 put (put) options million US dollars reflected.
However, if the bitcoin price stays near $30,500 at 8:00 a.m. UTC on June 30, only $630 million worth of these call (buy) options will be available. This difference arises because the right to buy Bitcoin at $31,000 or $32,000 is useless if BTC is trading below that level at expiry.
Bitcoin bears are targeting below $30,000 to level the balance
Below are the four most likely scenarios based on current price action. The number of option contracts available on June 30 for call (bull) and put (bear) instruments varies by expiry price. The imbalance in favor of each side represents the theoretical gain.
- Between $28,000 and $29,000: 7,200 calls vs. 16,200 puts. Bears are in control and making $250 million in profit.
- Between $29,000 and $30,000: 13,000 calls vs. 12,600 puts. The result is balanced between put and call options.
- Between $30,000 and $31,000: 1,500 calls vs. 2,100 puts. The net result favors call instruments by $440 million.
- Between $31,000 and $32,000: 3,300 calls vs. 800 puts. The net result favors call instruments by $670 million.
This rough estimate takes into account the call options used in bullish bets and the put options used in neutral to bearish trades only. However, this simplification ignores more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin over a certain price. Unfortunately, there is no easy way to estimate this effect.
Related: Will $30,000 Be a New Springboard for Bitcoin Bulls?
Consequently, it will come down to whether BTC price bears are willing to take a risk while the SEC reviews potential spot bitcoin ETF approval.
While it is impossible to gauge the potential inflow or timing of such an event, it paves the way for bulls to secure a $440 million profit by sustaining bitcoin price above $30,000 in the short-term.
This article is provided for general informational purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
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