Bitcoin’s $900M Weekly Options Expiry: Bull vs Bear Battle and the Path to $30,000 Breakout

Intricate financial battlefield with bull and bear, pathway to $30,000, stormy atmosphere, Warren Buffett's shadow, glowing $27,400 support, ray of light at $28,000, hovering Bitcoin tokens, tension-filled environment, four distinct outcome scenarios, caution in the air.

The upcoming $900 million Bitcoin weekly options expiry on May 12 could be pivotal in determining whether the cryptocurrency’s price dips below $27,000. Bearish traders may attempt to capitalize on macroeconomic headwinds, Silk Road Coins’ FUD, and uncertainty triggered by Bitcoin’s transaction fee spike to drive the cryptocurrency’s price downward in the coming days.

Bitcoin’s price recently surged past $29,800 on May 6 but encountered stronger than anticipated resistance, causing a subsequent 8.2% two-day correction that tested the $27,400 support level. This price movement suggests that markets may be entering a period of sideways trading as investors assess the ongoing economic crisis and its potential impact on the crypto market.

Berkshire Hathaway owner and billionaire investor Warren Buffett has recently expressed pessimism about the growth of the US economy. His outlook may be influencing some Bitcoin traders to reduce exposure over the past week, subsequently diminishing the possibility of a $30,000 breakout.

The optimism of bullish traders could be seen as excessive, considering the May 12 options expiry’s open interest of $900 million. Bears were likely anticipating prices below $28,000, further fueling this optimism. However, if Bitcoin’s price hovers around $27,500 at 8:00 am UTC on May 12, a mere $11 million of the call (buy) options will be accessible. This is because the right to buy Bitcoin at $28,000 or $29,000 would be rendered useless if the cryptocurrency trades below those levels upon expiry.

To restore balance, Bitcoin bulls must aim for $28,000. We can examine the following four scenarios based on current price fluctuations to gauge which side is favored on May 12 based on the available options contracts:

1) Between $25,000 and $27,000: 100 calls vs. 9,900 puts. In this case, the bears have firm control and profit by $230 million.
2) Between $27,000 and $28,000: 400 calls vs. 5,000 puts. The net outcome would favor put (sell) instruments by $120 million.
3) Between $28,000 and $29,000: 1,500 calls vs. 2,100 puts. This range presents a balanced outcome for both put and call options.
4) Between $29,000 and $30,000: 3,300 calls vs. 800 puts. The net result would favor call (bull) instruments by $70 million.

These figures consider call options for bullish bets and put options primarily for neutral-to-bearish trades. However, this simplified analysis does not account for more sophisticated investment strategies, such as selling a put option to gain positive exposure to Bitcoin above certain thresholds. Estimating these effects is difficult.

Currently, with the Bitcoin network operating as intended, selling pressure has begun to subside, stabilizing the cryptocurrency’s price around $27,500. Still, traders should remain cautious, as bears hold an advantageous position leading up to the weekly options expiry, which favors negative price movement.

Source: Cointelegraph

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