A whopping $9.25 billion worth of Bitcoin options is set to expire on the morning of June 28. This monthly expiry holds significant importance as it marks the end of the first half of 2024 and historically represents the second largest expiry in all markets, including traditional finance. Investors are particularly concerned following the 12% decline in the stock of the $3 trillion tech giant, NVidia, since its all-time high on June 20.
The recent downward pressure on Bitcoin has given the bears a potential advantage of $430 million. It has been two months since the Bitcoin halving, which likely explains why 57% of bullish bets have been placed at $70,000 or higher. However, the market has shown weakness in the past two weeks, rendering those call options worthless. If Bitcoin (BTC) remains near $61,500 on June 28 at 8:00 am UTC, the options to buy BTC at $62,000 and $64,000 will not be part of the expiry. Similarly, put options to sell at $58,000 and $60,000 will become null.
Bitcoin bulls have weak macroeconomic data on their side, which favors a more aggressive rate cut and monetary stimulus campaigns from the United States Federal Reserve and Department of Treasury. Sales of new U.S. single-family homes dropped to a six-month low in May, down 11.3% from the previous year. More concerning is the fact that, at the current sales pace, it would take 9.3 months to clear the supply of new houses, up from 8.1 months in April.
A report by Charles Schwab on June 24 noted that the current dynamics of the finance market resemble those of 2021, potentially signaling a bear market on the horizon. Reasons for concern include a growing divergence between the S&P 500 and equally weighted indexes, with artificial intelligence stocks leading the way. The analysts conclude that while there is no immediate risk for the bull market, more participants need to join the party for it to continue.
Currently, Deribit is the leading market for June BTC options with a total open interest of $6.65 billion. The Chicago Mercantile Exchange (CME) follows with $1.15 billion, followed by OKX with $735 million and Binance with $520 million. In total, the combined call and put BTC options for June 28 amount to $9.25 billion, which is significant but also inflated by excessively bullish call options.
The put-to-call ratio of 0.51 indicates an imbalance between the $4.4 billion open interest in call options and the $2.25 billion in put options. However, if Bitcoin’s price remains below $65,000 at 8:00 am UTC on June 28, only $440 million worth of these call options will be part of the expiry.
Based on current price trends, here are the four most likely scenarios. The availability of options contracts for calls and puts on June 28 varies depending on the settlement price:
1. Between $57,000 and $60,000:
– 660 calls versus 14,850 puts.
– The net result favors the put options by $820 million.
2. Between $60,000 and $62,000:
– 3,910 calls versus 11,140 puts.
– The net result favors the put options by $430 million.
3. Between $62,000 and $64,000:
– 5,220 calls versus 8,690 puts.
– The net result favors the put options by $215 million.
4. Between $64,000 and $66,000:
– 6,880 calls versus 6,940 puts.
– The outcome is approximately balanced between call and put options.
It is important to note that this rough calculation assumes that call options are primarily used for bullish bets and put options for neutral-to-bearish positions. However, more complex investment strategies are not accounted for in this simplification.
In summary, Bitcoin bulls are in desperate need of maintaining the $60,000 support ahead of the June 28 expiry to avoid a potential scenario where put options at Deribit are favored with $820 million. This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.