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Bitcoin Bulls Face Tough Battle Ahead of $6.5 Billion Options Expiry Amid High Hopes and External Influences

Bitcoin investors are known for their bullish outlook, and despite multiple failed attempts to sustain prices above $71,000, derivatives betting on $80,000 and $90,000 continue to rise.

This is driven by expectations of high-volatility events such as geopolitical tensions, socio-political changes, U.S. presidential support, and increased corporate adoption of Bitcoin.

Bitcoin bulls were overly optimistic, betting on $72,000 or higher

Bitcoin’s $6.5 billion options expiry on May 31 is a prime example.

Bulls’ failure to break the $70,000 resistance over the past week suggests these optimistic call (buy) options may become worthless.

Notably, 91% of these instruments were placed at $72,000 or higher, indicating a reliance on a sustained rally before May 31.

As the deadline nears, it appears Bitcoin bears may avoid significant losses.

Contrary to Bitcoin-only investor beliefs, BTC’s price is influenced by external factors like monetary policies, economic trends, inflation, unemployment, and confidence in the government’s bond-issuing capability.

Regardless of Bitcoin’s temporary correlation with the stock market and gold, investors usually hold cash and short-term U.S. Treasury bonds when market fear prevails.

The Nasdaq Composite index hitting an all-time high above 17,000 points on May 28 shows investor confidence in the U.S. Federal Reserve’s soft landing plan.

This plan aims for inflation to return to its 2% target while maintaining favorable corporate earnings.

This scenario boosts the outlook for risk-on assets, including Bitcoin, as reduced interest rates are expected.

The optimistic bets for Bitcoin’s monthly options expiry at 8:00 am UTC on May 31 reflect the 25% gains as BTC soared from $56,883 to $71,417 in early May.

However, this rally was unsustainable, especially after the approval of the spot Ethereum exchange-traded fund (ETF) in the U.S., creating competition for institutional funds.

Aggregate data predicts a $270 million profit for bulls if BTC trades above $70,000
To understand the odds for each BTC expiry price level, analyzing the open interest of calls (buy) and puts (sell) is essential.

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Call options dominate with a 70% higher notional value, but Deribit’s $4.62 billion open interest will likely be much lower if BTC trades below $70,000 on May 31.

Similarly, put option investors will be disappointed if Bitcoin remains near $67,800, as only 5% of those $1.7 billion contracts were placed at $68,000 or higher.

Deribit leads the options market with a 71% market share of Bitcoin’s monthly open interest in May. However, aggregate data from various exchanges show different investor profiles.

The Chicago Mercantile Exchange (CME) is the second-largest player with $745 million, followed by OKX with $600 million. Binance and Bybit totaled $315 million and $160 million, respectively.

If Bitcoin stays near $67,800 on May 31, the aggregate open interest for call options will be $135 million, while put options at $68,000 will amount to $145 million.

This level is fairly balanced, but both bulls and bears have incentives to influence the price before expiry.

For instance, a $65,900 price would favor put options by $95 million, while an expiry at $70,000 or higher would give call options a $270 million advantage.

With less than three days until expiry, it seems unlikely bulls will push Bitcoin’s price above $70,000 without short-term catalysts, favoring a neutral outcome near $68,000.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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