Bitcoin’s weekly options expiry worth $900 million on May 12th may play a crucial role in determining whether the digital currency will drop below $27,000. There is a possibility that the BTC bears will take advantage of macroeconomic headwinds and uncertainty caused by Bitcoin’s transaction fee spike to pull the price down in the coming days.
Market Analysis and Investor Sentiment
The BTC/USD pair had broken above $29,800 on May 6th, but the resistance proved stronger than anticipated, and the following two-day correction of 8.2% tested the $27,400 support. This indicates that investors are evaluating the economic crisis dynamic and its potential impact on cryptocurrencies. Billionaire investor Warren Buffett is no longer optimistic about the US economy’s growth, which might explain why some Bitcoin traders have reduced their exposure over the past week, greatly reducing the odds of breaking $30,000.
Four Likely Scenarios
The open interest for the May 12th options expiry is $900 million, but the actual figure will be lower since bears were expecting sub-$28,000 price levels. The 1.65 call-to-put ratio reflects the imbalance between the $560 million in call (buy) open interest and the $340 million in put (sell) options. If Bitcoin’s price remains around $27,500 at 8:00 am UTC on May 12th, only $11 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $28,000 or $29,000 is worthless if BTC trades below that level on expiry.
Based on the current price action, four likely scenarios have been identified. The number of options contracts available on May 12th for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:
– Between $25,000 and $27,000: 100 calls vs. 9,900 puts. Bears in total control, profiting $230 million.
– Between $27,000 and $28,000: 400 calls vs. 5,000 puts. The net result favors the put (sell) instruments by $120 million.
– Between $28,000 and $29,000: 1,500 calls vs. 2,100 puts. The result is balanced between put and call options.
– Between $29,000 and $30,000: 3,300 calls vs. 800 puts. The net result favors the call (bull) instruments by $70 million.
However, this crude estimate 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.
Ultimately, the selling pressure dissipated after it became evident that the Bitcoin network was working as designed, causing Bitcoin’s price to stabilize around $27,500. However, traders should be cautious as the bears are still in a better position for Friday’s weekly options expiry, favoring negative price moves.
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