Fed pauses interest rates, but Bitcoin options data still points to BTC price downside

Bitcoin’s price has been stuck below the $26,300 mark since June 10, showing a 14.8% decrease in two months. Meanwhile, the Nasdaq technology stock market index has risen by 13.6% in the same time period, demonstrating that investors are not running to the security of cash and short-term debt. In fact, the demand for US government bonds has been dwindling for the past six weeks.

The yield on two-year U.S. Treasurys, for instance, rose from 3.80% on May 4 to 4.68% on June 14. When the demand for debt instruments decreases, it leads to higher payouts, thus raising the yield. If the investor believes that inflation will stay above the target, then investors will be inclined to seek a higher yield when trading bonds.

The U.S. Treasury is due to launch more than $850 billion in fresh notes between June and September. Since the issuance of extra debt usually results in higher yields, the market is predicting that families and businesses will have to pay more for borrowing. Nevertheless, this does not explain why investors have been investing in tech companies rather than Bitcoin (BTC), as shown by the last two months’ performance.

Eight consecutive weeks of crypto fund outflows

CoinShares’ most recent “Digital Asset Fund Flows Report” revealed that $88 million was withdrawn from the sector during the week ending June 10. This large decrease added to the eight-week period of outflows, which has now reached a total of $417 million.

Cumulative outflows for Bitcoin over the course of eight weeks totaled $254 million, which is roughly 1.2% of the total assets managed. CoinShares analysts have attributed the trend to monetary policy considerations, as interest rate hikes appear to be continuing without abatement, causing investors to stay alert.

For the past two weeks, Bitcoin has been attempting to regain the $27,500 support level, yet this may be more difficult than anticipated considering the upcoming $600 million weekly options expiry on June 16.

A brief Bitcoin pump above $27,000 made bulls giddy

It is noteworthy that the true open interest for the options expiry will be lower since bulls focused their wagers above $27,000. These investors probably became excessively hopeful after Bitcoin’s cost rose 8% on June 6, eliminating the losses that caused BTC to drop to $25,400.

The ratio of 0.73 put-to-call indicates a discrepancy between the $350 million of call (buy) open interest and the $250 million of put (sell) options.

Should the price of Bitcoin stay close to $26,000 at 8:00 am UTC on June 16, only $27 million worth of call (buy) options will be available. This is because if BTC is trading below the levels of $27,000 or $28,000 when it expires, the right to buy it at those prices is rendered obsolete.

Jan3 CEO claims that Bitcoin is “far bigger” than Binance or Coinbase, as evidenced by BTC Prague 2023.

Bulls need Bitcoin price at $26,500 to avoid a $100 million loss

Below are the three probable scenarios based on the present price movement. The number of call (bull) and put (bear) options contracts accessible on June 16 will be contingent on the expiry price.

The theoretical profit is derived from the imbalance favoring each side.

This rough calculation takes into account the call options employed in positive trades and the put options only in neutral-to-negative trades. This simplification overlooks more intricate investing approaches.

Traders should still exercise caution, as the bears are in a more advantageous position for Friday’s weekly options expiry, which is likely to result in downward price movements. Therefore, it is not impossible that a steep drop below $25,000 could occur.

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