Bitcoin bears aim to pin BTC under $39K ahead of Friday's $1.9B options expiry

Until April 25, Bitcoin (BTC) bulls had been defending the $38,000 mark against bears. Between April 5 and 26, when Bitcoin fell from $46,700 to $37,700 in a single day, most of the bullish bets on the upcoming $1.96 billion monthly options expiration were exposed as worthless.

Regulatory risks continue to pose a risk to Bitcoin, and on April 26, the New York State Assembly passed a bill prohibiting new proof-of-work (PoW) cryptocurrency carbon-based mining facilities in the state. Fortunately for Bitcoin, mining equipment is portable, so its security isn’t affected by this.

The spread between German and French bonds widened again in July, hitting the highest level since October 2015. The move followed reports that French President Emmanuel Macron was preparing to banish diesel vehicles from Paris by 2025. As a result of this geopolitical tension in Europe, investors have been avoiding riskier assets.

Investors are also concerned with the prospect of a 250 basis point rate increase by the United States Federal Reserve throughout 2022. The scheme is designed to control inflation, but it might cause global economies to fall into recession, which is another reason why investors are avoiding highly volatile assets like cryptocurrencies.

When the price of Bitcoin dropped below $40,000, it was almost unimaginable to most bulls –

The April 29 options expiration has an open interest of $2 billion, but the true figure will be far lower owing to bearish traders who were not anticipating the BTC price to fall below $40,000. These traders may have been fooled into believing Bitcoin would remain over $45,000 between March 27 and April 6, when it placed enormous bets.

Bitcoin options aggregate open interest for April 29. Source: CoinGlass

The 1.55 call-to-put ratio demonstrates more significant bullish bets, with the call (buy) open interest at $1.19 billion versus the puts (sell) options’ $770 million open interest. nHowever, as Bitcoin grows near $39,000, most bullish bets will become worthless.

For example, if Bitcoin’s price remains below $40,000 at 8:00 a.m. UTC on April 29, only $60 million worth of these calls (buy) options will be available. This discrepancy exists since there is no point in obtaining Bitcoin at $40,000 after it falls beneath that level on expiration.

To correct the scales, the Bulls will require $41,000 –

Here are the three most likely outcomes based on current price trends. Because the expiry price determines the number of call (buy) and put (sell) instruments available on April 29, the amount of option contracts available varies. The theoretical profit is defined as:

• Between $37,000 and $39,000: 600 calls vs. 9,800 puts. The net result favors the put (bear) instruments by $350 million.
• Between $39,000 and $40,000: 1,500 calls vs. 8,300 puts. The net result favors bears by $260 million.
• Between $40,000 and $41,000: 3,400 calls vs. 5,600 puts. Bears remain better positioned by $90 million.
• Between $41,000 and $42,000: 4,100 calls vs. 4,700 puts. Favors the put (bear) instruments by $30 million.

Even though it’s a crude estimate, it does include the put options used in bearish bets and the call options only in neutral-to-bullish transactions. However, this oversimplification excludes more sophisticated investment techniques.

For example, a trader may have sold a put option, obtaining a lot of credited exposure to Bitcoin above a specific price but there’s no easy method to determine the influence.

Bears aim to earn $350 million in profits –

On April 29, bitcoin bears will need to push the price below $39,000 in order to earn a $350 million profit. On the other hand, the bulls’ best-case scenario requires a 6 percent price increase above $41,000 in order to minimize their losses to $30 million. Bears will certainly attempt to keep BTC down.

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