Bitcoin (BTC) was trying to break out of the downtrend last week, and the first attempt on June 16 failed to overcome the $22,600 resistance. The second attempt to rise to $21,400 on June 21 was followed by an 8% price correction. After two failed breakouts, the price is currently trading below $20,000, raising questions about whether $17,600 was really the bottom.

4-hour Bitcoin/USD chart on Coinbase. Source: Trading View
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The longer it takes for BTC to break out of this bearish pattern, the stronger the resistance line becomes and traders keep a close eye on the trend. That is why it is important for the bulls to show strength during the $2.25 billion monthly option expiration this week.

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Regulatory uncertainty continues to weigh on crypto markets after European Central Bank (ECB) President Christine Lagarde expressed her conviction that more scrutiny is needed. On June 20, Lagarde expressed her opinion on the staking and lending activities of the sector: “[…] the lack of regulation is often associated with fraud, completely illegal valuation claims and very often speculation, as well as criminal transactions.”

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Bitcoin miners forced to liquidate their BTC holdings are adding to the negative pressure on the price of BTC, with data from Arcane Research showing that public bitcoin mining companies sold 100% of their BTC production in May, compared to the usual 20-40% in previous years. months. Currently, miners collectively own 800,000 BTC, raising fears of a possible sell-off. The Bitcoin price correction reduced the profitability of the miners, as the cost of production sometimes exceeded their margin.

The option expiration on June 24th will be particularly worrisome for investors because Bitcoin bears are likely to make a $620 million profit by pushing BTC below $20,000.

The bulls were betting $40,000 and up.

Open interest for options expiring June 24 is $2.25 billion, but the actual figure will be much lower as bulls have been overly optimistic. These traders completely missed the mark after BTC fell below $28,000 on June 12, but their optimistic bets for monthly option expiration are over $60,000.

Bitcoin options merge open interest on June 24th. Source: CoinGlass.

The call-to-put ratio of 1.70 shows the prevalence of $1.41 billion of open call (buy) options compared to $830 million of put (sale) options. bullish rates are likely to depreciate.

If the price of Bitcoin stays below $21,000 at 8:00 AM UTC on June 24th, only 2% of these call options will be available. This difference arises because the right to buy Bitcoin at $21,000 is worth nothing if Bitcoin trades below that level at expiration.

Bears holding bulls by 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 (bullish) and put (bear) instruments varies by expiration price. The imbalance in favor of each side is the theoretical profit:

  • $18,000 to $20,000: 500 calls versus 33,100 puts. Net result in favor of puts (bearish) of $620 million.
  • $20,000 to $22,000: 2800 calls versus 27000 puts. The net result in favor of the bears is $520 million.
  • $22,000 to $24,000: 5,900 calls versus 26,600 puts. Net result in favor of puts (bearish) by $480 million.

This rough estimate takes into account puts used in bearish bets and calls only in neutral or bullish trades. However, this oversimplification ignores more complex investment strategies.

For example, a trader could sell a put option, effectively gaining positive access to bitcoin above a certain price, but unfortunately there is no easy way to measure this effect.

A few more drops below $20,000 won’t be surprising.

Bitcoin Bears need to push the price below $20,000 on June 24 to make a $620 million profit. On the other hand, in a bullish best-case scenario, a pump above $22,000 is required to reduce the impact by $140 million.

Bitcoin bulls were long with $500 million leverage eliminated June 12th and 13th, so they should have less margin than required to increase the price. Given this data, the bears are more likely to keep BTC below $22,000 before the options expire on June 24th.

The views and opinions expressed here are solely those of author and do not necessarily represent the views of Cryptooshala. Every investment and trading move involves risk. You should do your own research when making a decision.