Cryptocurrency bears are looking to take advantage of the upcoming $900 million Bitcoin (BTC) weekly options expiry on May 12 and drive the price down towards the $27,000 level. Recent macroeconomic headwinds, Silk Road coins' FUD and higher Bitcoin transaction fees all make things more difficult for BTC, as it is currently struggling to break above $29,800. Even Warren Buffett, one of the most prominent investors in the world, is no longer optimistic about the U.S. economy, which could be a major factor in explaining investors' decision to reduce their exposure to BTC in the past week.
The open interest of the options expiry stands at $900 million, but the actual number may likely be lower as some bears are expecting the price to be below $28,000. Their outlook is not unwarranted, considering the 11.2 percent rise in price between April 9 and April 14 that tested $31,000 against high resistance. The call-to-put ratio of 1.65 supports more bullish sentiment than bearish sentiment, showing that $560 million of call (buy) open interest has been lined up against only $340 million in put (sell) options.
If Bitcoin’s price stays around $27,500 at 8:00 UTC on May 12, only $11 million worth of these calls (buys) could be taken up. This could happen because trying to purchase BTC at prices like $28,000 or $29,000 becomes defunct if its trading rate has sunk lower by the expiry date. The following four scenarios are the most likely ones depending on the current price movement: the number of options contracts available on the 12th of May for calls (bulls) and puts (bears) range widely according to the expiry price. Theoretically, a trader could benefit by selling a put option to gain positive exposure to BTC beyond a particular price, however, quantifying this effect accurately is difficult.
It has become clear that the Bitcoin network is operating as designed, which eased selling pressure and allowed Bitcoin’s price to stabilize to some extent. In spite of this, traders should be vigilant as bears are in a good position going into the weekly expiry, which may lead to negative price movements.
Scarlett Wilson
- 2023-05-11
Bearing in Mind the $900M Bitcoin Options Expiry on May 12
Bears are looking to take advantage of the upcoming $900 million Bitcoin (BTC) weekly options expiry on May 12 and drive the price down, due to recent macroeconomic headwinds and other factors. Find out the four scenarios most likely to happen and how to be vigilant as bears are in a good position going into the weekly expiry.
