The June 30 expiration of $4.7 billion worth of Bitcoin (BTC) monthly options could 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 Bitcoin Breaks Yearly Highs
Many analysts see bitcoin’s recent break above $27,000 as a bet on multiple spot bitcoin exchange-traded fund (ETF) filings, including those from BlackRock and ARK Invest.
The news also raised expectations that Grayscale would be able to convert its Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF.
Bitcoin price gains are currently capped at $31,000
Bitcoin bears, on the other hand, will try to take advantage of macroeconomic and regulatory headwinds, including exchanges implementing mandatory know-your-customer (KYC) procedures.
On June 28, KuCoin announced an upcoming KYC system upgrade to improve compliance with global anti-money laundering regulations.
Additionally, as the network hashrate hits 400 exahash per second, there is growing concern about the impact of miner selling pressure. The Glassnode analytics firm noted that miners sent an all-time high percentage of BTC revenue to exchanges in the past week, totaling $128 million. Oddly, the move mimics the peak seen during the 2021 bull market when miners took profits.
Also, during the ECB Forum in Portugal, Federal Reserve Chairman Jerome Powell warn Most policymakers expect two more rate hikes this year. Investors are pricing in an 82 percent chance of a 25 basis point hike on July 26, according to the CME FedWatch tool.
Bitcoin’s price last touched the $31,000 level on June 27, but the resistance proved stronger than expected. The subsequent pullback to $30,000 supports the short-term sideways trading thesis as investors assess the impact of additional Fed rate hikes.
This restrictive situation in the global economy may explain why some Bitcoin traders have decided to take profits, limiting price gains.
$4.7 Billion Out of Reach as Bulls Are Overly Optimistic
Open interest in options expiring on June 30 was $4.7 billion, but the actual figure would be lower as bulls expect a price level of $32,000 or higher. Those traders became overly optimistic after bitcoin prices rallied 25.5 percent between June 15 and 23, testing resistance at $31,000.
The put-to-call ratio of 0.56 reflects an imbalance between $3.1 million in call (buy) open interest and $1.7 million in put (sell) options.
But if the bitcoin price stays near $30,500 by 8:00 AM UTC on June 30, only $630 million of those call (buy) options will be worth. This discrepancy occurs because the right to buy Bitcoin for $31,000 or $32,000 is useless if BTC is trading below that level at expiration.
Bitcoin bears target sub-$30,000 to balance the scales
Below are the four most likely scenarios based on current price action. The number of call (bull) and put (bear) instrument option contracts available for June 30 varies based on the price at expiration. An imbalance that favors both parties constitutes a theoretical profit.
- Between $28,000 and $29,000: 7,200 calls and 16,200 puts. The bears dominated, taking a profit of $250 million.
- Between $29,000 and $30,000: 13,000 calls and 12,600 puts. The result is a balance between puts and calls.
- Between $30,000 and $31,000: 1,500 calls and 2,100 puts. The end result was $440 million in favor of the bullish instrument.
- Between $31,000 and $32,000: 3,300 calls and 800 puts. The end result was $670 million in favor of the bullish instrument.
This rough estimate takes into account calls used in bullish bets and puts used in neutral to bearish trades. Even so, this simplistic approach ignores more complex investment strategies.
For example, a trader can sell put options, effectively gaining positive exposure to Bitcoin above a certain price. Unfortunately, there is no easy way to estimate this effect.
Related: Will $30,000 Be a New Springboard for Bitcoin Bulls?
So, it will depend on whether BTC price bears are willing to take the risk while the SEC is analyzing a potential spot bitcoin ETF approval.
While it is impossible to estimate potential inflows or the timing of such an event, this paves the way for bulls to secure a $440 million profit by keeping the Bitcoin price above $30,000 in the short term.
This article is for general informational purposes only and is not intended and should not be construed as legal or investment advice. The views, ideas and opinions expressed here are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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