Bitcoin investors, known for their bullish nature, continue to bet on higher prices despite several unsuccessful attempts to sustain prices above $71,000. These investors are driven by expectations of high-volatility events such as geopolitical tensions, socio-political changes, U.S. presidential support, and increased corporate adoption of Bitcoin.
However, the recent options expiry on May 31 suggests that these optimistic bets may not pan out. With Bitcoin failing to break the $70,000 resistance over the past week, it is likely that these excessively optimistic call options will become worthless. Most of these options were placed at $72,000 or higher, indicating that bulls were counting on a sustained rally before the expiry date. As the deadline approaches, it seems more likely that Bitcoin bears will avoid significant losses.
Contrary to popular belief among Bitcoin-only investors, BTC’s price is heavily influenced by external factors such as monetary policies, economic trends, inflation, unemployment, and confidence in the government’s ability to issue bonds successfully. While Bitcoin may temporarily correlate with the stock market and gold, investors typically hold cash positions and short-term U.S. Treasury bonds during times of market fear.
The recent breaking of the Nasdaq Composite index’s all-time high indicates that investors are more confident in the U.S. Federal Reserve’s plan for a soft landing. This plan aims to bring inflation back to its 2% target while ensuring favorable corporate earnings for most sectors. This positive outlook for risk-on assets, including Bitcoin, is driven by the anticipation of reduced interest rates.
The overly optimistic bets for the Bitcoin options expiry on May 31 reflect the significant gains that occurred in the first 20 days of May. However, this rally did not prove sustainable, especially after the approval of the spot Ethereum exchange-traded fund (ETF) in the U.S., which creates competition for institutional investors’ funds.
To analyze the odds being placed for each BTC expiry price level, it is important to consider the open interest of the call and put options. Although call options dominate with a higher notional value, the actual open interest will likely be lower if Bitcoin trades below $70,000 on May 31. Similarly, put option investors will be disappointed if Bitcoin remains near $67,800 on the monthly expiry.
Deribit is the leading player in the options market, responsible for a significant market share of Bitcoin’s monthly open interest in May. However, it is worth noting that investors’ profiles vary among exchanges. The Chicago Mercantile Exchange (CME), OKX exchange, Binance, and Bybit are also major players in the options market.
If Bitcoin remains near $67,800 on May 31, the aggregate open interest for call options will be $135 million, while the put options open interest at $68,000 amounts to $145 million. This indicates a fairly balanced level, but both bulls and bears have incentives to influence the price before the expiry. A price of $65,900 would favor put options, while an expiry at $70,000 or higher would benefit call options.
With less than three days remaining until the monthly expiry, it is unlikely that bulls will be able to push Bitcoin’s price above $70,000 without any significant catalysts. Therefore, the odds suggest a neutral outcome near $68,000.
Please note that this article is for informational purposes only and should not be taken as legal or investment advice. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.