The sudden 15% surge of Bitcoin (BTC) to $30,300 between June 19 and June 21 came as a shock to many traders, leading to the liquidation of $125 million worth of leveraged short futures contracts. It is difficult to pinpoint the cause of the rally, however, some analysts believe it could be attributed to the potential influx of institutional investors if Blackrock’s ETF application is approved by regulators.
Cathie Wood, CEO and Chief Investment Officer of ARK Invest, outlined the logic behind the company’s optimistic outlook on Bitcoin’s price, particularly the $1 million goal. Wood argued that, in a deflationary economy, Bitcoin could still outperform due to its capacity to reduce counterparty risk in comparison to the traditional financial system.
Subsequently, on June 16, Binance exchange was successful in negotiating a provisional arrangement with the U.S. Securities and Exchange Commission (SEC) to prevent a probable asset freeze, thus reducing the negative regulatory pressure. This event provided Bitcoin bears with an even greater opportunity to benefit from the $715 million weekly BTC options expiry.
Bears made a mistake when BTC price dropped below $25,000
On June 10, Bitcoin’s price dropped beneath $26,300, prompting traders to take bearish positions with option contracts. This low level was only regained on June 16, which explains why bears are focusing their wagers on Bitcoin prices trading beneath $27,000.
The put-to-call ratio of 0.82 indicates the disparity in open interest between the $415 million call (purchase) options and the $300 million put (sell) options. However, the result will be diminished as bears were taken aback when Bitcoin rose 10% within two days.
If Bitcoin’s price stays close to $29,800 at 8:00 a.m. UTC on June 23, there will be only $5 million in put options. This is because the ability to sell Bitcoin at $28,000 or $29,000 becomes invalid if BTC is trading above that price when the options expire.
Bulls are in a good position to capture a $250 million profit
Below are the four most probable scenarios considering the current price action. The amount of call (buy) and put (sell) options contracts obtainable on June 23 is determined by the expiration price. The disparity favoring either side is the potential profit.
This approximate calculation only takes into account put options in bearish trades and call options in neutral-to-bullish transactions. Despite this simplification, other more intricate investment tactics are not included. For instance, a trader could have sold a call option, thereby obtaining negative exposure to Bitcoin above a certain price, but it is hard to determine the extent of this effect.
Singapore’s Monetary Authority of Singapore has proposed digital currency standards in collaboration with major industry players.
Bears may try to downplay the multiple Bitcoin ETF proposals, such as those from Blackrock and WisdomTree. On the other hand, bulls should pay close attention to government regulations, including the ongoing inquiry into Binance’s activities in France, which the Paris Prosecutor’s Office has allegedly accused of “acts of illegal exercise of the function of a service provider on digital assets (PSAN) and acts of aggravated money laundering”.
The weekly expiration’s critical level stands at $28,000, yet it is impossible to foretell the result because of augmented cryptocurrency regulatory hazards. Should bulls be able to acquire $250 million or more, those funds are likely to be employed to further fortify the $28,000 support.
Subscribe to our email newsletter to get the latest posts delivered right to your email.