The expiration of $ 2.25B Bitcoin options on Friday may prove that $ 17.6K was not the bottom of BTC

Bitcoin (BTC) has been trying to break out of a downward trend for the past week and the first attempt on June 16 failed to break the $ 22,600 resistance. The second attempt at $ 21,400 on June 21 was followed by a price correction of 8%. After two failed breakouts, the price is currently trading below $ 20,000 and raises questions as to whether $ 17,600 was really the bottom.

Bitcoin / USD 4-hour chart at Coinbase. Source: TradingView

The longer it takes for BTC to break this bearish pattern, the stronger the resistance line becomes and traders follow the trend closely. That’s exactly why it’s important for bulls to show strength during this week’s $ 2.25 billion monthly options.

Uncertainty in regulation continues to weigh on cryptocurrencies after European Central Bank (ECB) President Christine Lagarde expressed her conviction over the need for stricter controls. On June 20, Lagarde expressed his views on the sector’s strike and lending activities: “[…] the lack of regulation often results in fraud, completely illegal valuation claims and very often speculation, as well as criminal acts. “

Bitcoin miners forced to liquidate their BTC holdings add more negative pressure to BTC price and data from Arcane Research show that publicly listed Bitcoin mining companies in May sold 100% of their BTC production in comparison with the usual 20% to 40% in previous months. Currently, miners collectively hold 800,000 BTC, which raises concerns about a possible sale. The price correction of Bitcoin drained the profitability of miners because the production costs sometimes exceeded their margins.

The expiration of options on June 24 will be particularly alarming to investors, as Bitcoin bears are likely to profit $ 620 million by suppressing BTC below $ 20,000.

Bulls place their bets at $ 40,000 and above

The open interest rate for expiration of options on June 24 is $ 2.25 billion, but the actual figure will be much lower because bulls were too optimistic. These traders missed the mark completely after BTC dumped below $ 28,000 on June 12, but their bullish bet for the expiration of the monthly options extended beyond $ 60,000.

Bitcoin options gather open interest for June 24 Source: CoinGlass

The 1.70 call-to-put ratio shows the dominance of the $ 1.41 billion call (buy) open interest versus the $ 830 million put (sell) options. However, since Bitcoin is below $ 20,000, most bullish bets are likely to become worthless.

If the price of Bitcoin stays below $ 21,000 at 8:00 UTC on June 24, only 2% of these call options will be available. This difference happens because a right to buy Bitcoin for $ 21,000 is worthless if BTC trades below that level on expiration.

Bears have the bulbs at the horns

Below are the three most likely scenarios based on the current price action. The number of Bitcoin option contracts available on June 24 for call (bull) and put (bear) instruments varies, depending on the expiration price. The imbalance that favors each side forms the theoretical gain:

  • Between $ 18,000 and $ 20,000: 500 calls vs. 33,100 sets. The net result favors the put (bear) instruments with $ 620 million.
  • Between $ 20,000 and $ 22,000: 2,800 calls vs. 27.00 set. The net result favors bears with $ 520 million.
  • Between $ 22,000 and $ 24,000: 5,900 calls vs. 26,600 sets. The net result favors the put (bear) instruments by $ 480 million.

This rough estimate considers the put options used in bearish bets and the call options only in neutral-to-bullish trades. However, this oversimplification ignores more complex investment strategies.

For example, a trader could have sold a put option, effectively getting positive exposure for Bitcoin above a specific price, but unfortunately there is no easy way to estimate this effect.

A few more dips under $ 20,000 would not be surprising

Bitcoin bears must push the price below $ 20,000 on June 24 to guarantee a profit of $ 620 million. On the other hand, the best case of the bulbs requires a pump above $ 22,000 to reduce the impact by $ 140 million.

Bitcoin bulls had liquidated $ 500 million in leveraged long positions on June 12 and 13, so they should have less margin than necessary to drive the price higher. Given this data, bears have higher chances of pinning BTC below $ 22,000 prior to the expiration of June 24 options.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You have to do your own research when making a decision.