Bitcoin pushes to $40K, but are bulls strong enough to win Friday’s $735M options expiry?

The Bitcoin (BTC), price, has been in a falling wedge pattern over the past two months. It has also tested the $37.600 support multiple times.

BTC has fallen 16% in the past year, which is similar to Russell 2000’s performance.

Bitcoin/USD 1-day chart at FTX. Source: TradingView

Investors’ worries about the impact of worsening macroeconomic conditions are the real driving force behind Bitcoin’s current price action. Professional investors are concerned about the U.S. Federal Reserve’s tightening of economic policies. On May 3, billionaire hedge fund manager Paul Tudor Jones stated that investors face a worse environment than ever as the monetary authority raises interest rates at a time when financial conditions are already getting worse.

CNBC reported on May 4 that the European Union had implemented new sanctions to eliminate Russian crude oil imports. President Ursula von der Leyen, European Commission, stated, “This will be an absolute ban on all Russian oil, pipeline and seaborne, crude and refined.”

These traders are becoming more concerned about the possible impact of a global economic crisis on cryptocurrency markets. Investors will seek to protect themselves from the risky asset classes such as Bitcoin if global economies fall into recession.

The bulls didn’t expect prices below $40,000

The Bitcoin open interest expires May 6th at 735 million. However, the real number will be lower because bulls were taken by surprise when BTC fell below $40,000.

Bitcoin options open interest aggregated for May 6 Source: CoinGlass

The 1.22 ratio of call-to-put reflects the $405million call (buy) open rate against the $330million put (sell). However, with Bitcoin at close to $39,000, 89% bullish bets are likely to become worthless.

If Bitcoin’s price falls below $39,000 on May 6, bears have $100 million worth (sell) options. This is because a right to buy Bitcoin at $36,000 on expiry will not be valid.

Similar: BTC price gains 4% before Fed as MicroStrategy promises to protect Bitcoin after $21K crash

Bears could make $145 million on Friday

Based on current price action, here are the top four scenarios. The expiry price will determine the number of options contracts that are available for call (buy) or put (sell). The theoretical profit is the result of an imbalance in favor of each side.

Between $37,000 to $39,000: 500 calls, (buy), vs. 4,300 put (sell). The net result favors bears of $145 million. Between $37,000 and $40,000: 1,200 call (buy) vs. 2,560 puts (sell). The advantage bears enjoy is $50 million. Between $40,000 and $41,000, 3,800 calls can be bought vs. 1,100 put (sell). Bulls have a net advantage of $105 million. Between $41,000 and $42,000, 5,300 calls (buy), vs 700 puts (sell). Bulls increase their gains to $190 millions

This rough estimate includes the bullish options and neutral-to bearish options. This oversimplification ignores complex investment strategies.

A trader might have sold a call option to gain negative exposure to Bitcoin above a certain price. Unfortunately, it’s not possible to quantify this effect.

To make a $145million profit, bitcoin bears must keep the price below $39,000 by May 6. Bulls, on the other hand can avoid losing by pushing BTC above $40,000 which will net them $100 million in gains. Bears are better placed for May 6th expiry, considering the bearish macroeconomic environment.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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