Bitcoin’s price has been on a rollercoaster ride this past month. As BTC nears the expiry of its weekly options, commentators are predicting a bearish outcome for Bitcoin that would see it fall below $30K by Thursday morning.
The “btc options expiry time today” is a cryptocurrency that has been on the market for quite some time. The price of Bitcoin has been steadily increasing, and it will be interesting to see what happens when this week’s BTC options expire.
The price of Bitcoin (BTC) dropped to $25,500 on May 12, surprising investors and options traders alike. The sharp decline was not limited to cryptocurrencies; other large-cap companies had weekly losses of 25% or more over the same time period.
Growing economic uncertainty impacted S&P 500 index members like Illumina (ILMN), which declined by 27% over the past seven days and Caesars Entertainment (CZR) faced a 25% drop. Shopify (SHOP), one of the largest Canadian e-commerce companies also saw its stock plunge by 28%.
Traders are scratching their heads, wondering whether the recent volatility is due to the Federal Reserve’s tightening. The monetary authority has been raising interest rates and reiterating its ambitions to sell bonds and debt-related assets.
While this may be the case, traders should remember that the stock market rallied 113% between 2017 and 2021, as measured by the S&P 500 index. Keeping that in mind, the recent downturn is also a reflection of excessive valuations and overconfidence from investors.
Thankfully, not everything has gone against Bitcoin. Townsquare Media, a digital marketing and radio station startup located in New York, announced a $5 million Bitcoin investment on May 10. Nubank, Brazil’s and Latin America’s biggest digital bank, also stated that Bitcoin will get around 1% of its net assets.
The bulls were caught off guard.
Bitcoin’s dip below $25,500 on May 12 surprised bulls since just around 1% of call (buy) option bets for May 13 were made below this price level.
Bulls may have been duped by the latest effort to break beyond $40,000 on May 4, as their bets for the $610 million options on May 12 are heavily focused above $34,000.
Bitcoin options open interest on the 13th of May. Credit: Coinglass
Using the 0.90 call-to-put ratio, the $320 million put (sell) options have a modest edge over the $290 million call (buy) instruments. However, now that Bitcoin has fallen below $30,000, most bullish bets will be worthless.
Only $1 million worth of call (purchase) options will be available if Bitcoin’s price stays below $30,000 by 8:00 a.m. UTC on May 13. This disparity occurs because the right to purchase Bitcoin at $30,000 has no value if it trades below that level at expiration.
The Bears want to make a $260 million profit.
Based on current price activity, the three most probable possibilities are outlined below. The quantity of call (bull) and put (bear) options contracts available on May 13 vary based on the expiration price. The potential profit is made up of the imbalance favoring either side:
- 0 calls vs. 9,350 puts between $27,000 and $30,000. The overall outcome is $260 million in favor of the put (bear) instruments.
- 150 calls vs. 7,500 puts between $30,000 and $32,000. The bears win by $220 million in the end.
- 1,100 calls vs. 5,900 puts between $32,000 and $33,000. As a consequence, put (bear) options gain by $150 million.
This rough estimate takes into account put options in bearish bets and call options in neutral-to-bullish transactions. Despite this, more nuanced investing methods are ignored by this simplicity.
For example, a trader may have sold a put option, thereby obtaining positive exposure to Bitcoin above a certain price, although this impact is difficult to assess.
Bears are motivated to keep the price of Bitcoin low.
To make a $260 million profit, Bitcoin bearish must keep the price below $30,000 on May 13. In order to limit their losses to $150 million, the bulls’ best case scenario needs a 10.7% rise from current levels of $28,900 to $32,100.
Bitcoin bulls have liquidated $1.73 billion in leveraged long bets in the last three days, leaving them with less resources to drive the price higher in the near term. As a result, bears have a better chance of pushing BTC below $30,000 before the May 13 options expiration.
The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision is fraught with danger. When making a choice, you should do your own research.
The “bitcoin options expiry november” is the date for when the Bitcoin futures expire. The bears aim to pin it below $30K, but bulls will be trying to push it higher by then.
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