By
Godfrey Benjamin
April 20th, 2024
The open interest in Bitcoin options expiring on May 6 is $735 million, but experts believe the actual total will be lower.
Bitcoin price looks set to touch the $40,000 mark again after almost two months of turmoil. Bitcoin price, over the past couple of months, was stuck on a steep decline, failing to break above the $37,600 mark, after testing it on multiple occasions.
Bitcoin at press time was trading at $39,485.68, although down 16% year-to-date. Several reports suggest that Investors’ concerns about worsening macroeconomic conditions are the main driver of Bitcoin’s recent price behavior. Professional investors are worried about the impact of the US, which can make a case for the largest cryptocurrency market around the globe.
Traders are becoming increasingly anxious about the effects of a global macroeconomic crisis on cryptocurrency markets. If the world economy enters a downturn, investors will seek safety by avoiding risky asset classes like Bitcoin, which will eventually hurt the Bitcoin price.
The world’s peace has had a threat hanging over its head for most of the year now. The current contentious geopolitical scene does not also smile on the cryptocurrency market and along with strict economic policies from the US Federal Reserve on May 3, the environment for investors could take a turn for the worse. Paul Tudor Jones, a billionaire hedge fund manager, has attributed the current woes of the crypto market to the monetary authority raising interest rates when financial conditions are already worsening.
The spark in Bitcoin price has also become a determinant in Friday’s options expiry. The open interest in Bitcoin options expiry on May 6 is $735 million, but experts believe the actual total will be lower because bulls were caught off guard when BTC fell below $40,000.
The 1.22 call-to-put ratio reflects the $405 million call (buy) open interest against the $330 million puts (sell) options. Nonetheless, with Bitcoin hovering around $39,000, 89% of bullish wagers are likely to be worthless.
However, if Bitcoin’s price remains below $39,000 on May 6, bears will have $100 million worth of these put (sell) options available. This difference happens because a right to sell Bitcoin at $36,000 has no value if it trades over that amount at expiration.
Ahead of Friday’s options expiry, market experts have released the four most likely outcomes based on the current price action. The number of calls (buy) and put (sell) options contracts available on May 6 vary based on the expiry price.
The theoretical profit is determined by the imbalance favoring either side:
- Between $37,000 and $39,000: 500 calls (buy) vs. 4,300 puts (sell). The net result favors bears by $145 million.
- Between $39,000 and $40,000: 1,200 calls (buy) vs. 2,500 puts (sell). Bears have a $50 million advantage.
- Between $40,000 and $41,000: 3,800 calls (buy) vs. 1,100 puts (sell). The net result favors bulls by $105 million.
- Between $41,000 and $42,000: 5,300 calls (buy) vs. 700 puts (sell). Bulls boost their gains to $190 million.
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