On the morning of June 28, a significant amount of Bitcoin options worth $9.25 billion is set to expire. This monthly expiry holds particular importance as it concludes the first half of 2024 and historically represents the second-largest expiry in all markets, including traditional finance. Investors are especially concerned following the 12% decline of tech giant NVidia, which has seen a drop since reaching its all-time high on June 20, amounting to $3 trillion.
The recent downward pressure on Bitcoin has given bears a potential advantage of $430 million. This can be attributed to the fact that it has been two months since the Bitcoin halving, resulting in 57% of bullish bets being placed at $70,000 or higher. However, the market has displayed weakness in the past two weeks, rendering those call options essentially worthless. If Bitcoin remains near the $61,500 mark on June 28 at 8:00 am UTC, the options to buy BTC at $62,000 and $64,000 will not be included in the expiry. Similarly, put options at $58,000 and $60,000 will be rendered null.
Bitcoin bulls have the support of weak macroeconomic data, 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 reached a six-month low in May, declining by 11.3% compared to 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 from Charles Schwab on June 24 highlighted that the current dynamics of the finance market resemble those of 2021, potentially indicating an impending bear market. 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 in for it to continue.
Currently, Deribit holds the dominant position in the June BTC options market with an open interest of $6.65 billion. The Chicago Mercantile Exchange (CME) follows with an open interest of $1.15 billion, while OKX and Binance hold $735 million and $520 million, respectively. The total options for 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 0.51 put-to-call ratio indicates an imbalance between the $4.4 billion call open interest and the $2.25 billion 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 included in the expiry.
Based on current price trends, below are the four most likely scenarios, each dependent on the settlement price and availability of options contracts for calls and puts on June 28:
1. Between $57,000 and $60,000: There are 660 calls versus 14,850 puts, favoring put options by $820 million.
2. Between $60,000 and $62,000: There are 3,910 calls versus 11,140 puts, favoring put options by $430 million.
3. Between $62,000 and $64,000: There are 5,220 calls versus 8,690 puts, favoring put options by $215 million.
4. Between $64,000 and $66,000: There are 6,880 calls versus 6,940 puts, with a balanced outcome between call and put options.
It is important to note that this calculation assumes that call options are primarily used for bullish bets, while put options are used for neutral-to-bearish positions. However, more complex investment strategies are not taken into account in this simplification.
In summary, Bitcoin bulls are in dire need of maintaining the $60,000 support leading up to the June 28 expiry in order to avoid a potential scenario where put options at Deribit are favored, amounting to $820 million. This article does not provide investment advice or recommendations, and readers should conduct their own research before making any decisions.