Bitcoin options: How will tomorrow’s $4.7B expiry impact BTC price?
2023.06.29 10:44
The $4.7 billion Bitcoin (BTC) monthly options expiry on June 30 might play a decisive role in determining whether the $30,000 price will consolidate as long-term support and open room for further bullish momentum.
Why is Bitcoin breaking yearly highs?
Many analysts consider Bitcoin’s recent breakout above $27,000 a bet on the multiple spot Bitcoin exchange-traded fund (ETF) request applications, including those of BlackRock and ARK Invest.
The news also fueled expectations for Grayscale to be able to convert its Grayscale Bitcoin Trust (GBTC) to a Bitcoin ETF.
$31,000 caps Bitcoin price gains for now
On the other hand, Bitcoin bears will try to take advantage of macroeconomic and regulatory headwinds, including exchanges implementing mandatory Know Your Customer (KYC) procedures.
On June 28, KuCoin announced the upcoming KYC system upgrade in a move to increase compliance with global Anti-Money Laundering regulations.
Moreover, there’s increasing concern over the impact of miners’ sell pressure as the network hashrate reached 400 exahashes per second. The Glassnode analytics firm noted that miners sent an all-time high in BTC revenue percentage to exchanges over the past week, totaling $128 million. Curiously, the movement mimics spikes seen during the 2021 bull run as miners took profits.
Additionally, during the European Central Bank forum in Portugal, Federal Reserve (Fed) Chair Jerome Powell warned that most policymakers expect two more rate hikes this year. According to the CME FedWatch Tool, investors are pricing in 82% odds of a 25 basis point interest rate increase on July 26.
Bitcoin four-hour price movements during option expiries. Source: TradingView
Bitcoin price last flirted with the $31,000 level on June 27, but the resistance proved stronger than anticipated. The subsequent correction to $30,000 supports the thesis of sideways trading in the short term as investors evaluate the impacts of additional interest rate increases by the Fed.
Such a restrictive scenario for the global economy might explain why some Bitcoin traders decided to take profits, which limited the price upside.
$4.7 billion out of reach as bulls were too optimistic
The open interest for the June 30 options expiry is $4.7 billion, but the actual figure will be lower since bulls were expecting $32,000 or higher price levels. These traders got excessively optimistic after Bitcoin’s price rallied 25.5% between June 15 and June 23, testing the $31,000 resistance.
Deribit Bitcoin options aggregate open interest for June 30. Source: Deribit
The 0.56 put-to-call ratio reflects the imbalance between the $3.1 million in call (buy) open interest and the $1.7 million in put (sell) options.
But if Bitcoin’s price remains near $30,500 at 8:00 am UTC on June 30, only $630 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $31,000 or $32,000 is useless if BTC trades below that level on expiry.
Bitcoin bears aim for sub-$30,000 to balance the scales
Below are the four most likely scenarios based on the current price action. The number of options contracts available on June 30 for call (bull) and put (bear) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit.
- Between $28,000 and $29,000: 7,200 calls vs. 16,200 puts. Bears in control, profiting $250 million.
- 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 the call instruments by $440 million.
- Between $31,000 and $32,000: 3,300 calls vs. 800 puts. The net result favors the call instruments by $670 million.
This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.
For instance, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.
Related: Will $30K be a new springboard for Bitcoin bulls?
Consequently, it will come down to whether BTC price bears are willing to risk exposure while a potential spot Bitcoin ETF approval is being analyzed by the SEC.
Although it is impossible to estimate the potential inflow or the timing of such an event, it paves the way for bulls to secure a $440 million profit by keeping Bitcoin price above $30,000 in the short term.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
