Bitcoin Options with Bullish Outlook Dominated May's $6.5 Billion Expiry

With May 31 looming, Bitcoin bulls are feeling the pressure to surge past the $70,000 mark.

Source:cryptorank.io

Despite numerous unsuccessful endeavors to maintain prices above $71,000, the market remains optimistic, evident in the proliferation of derivatives speculating on $80,000 and $90,000. This bullish sentiment persists due to anticipated high-volatility triggers like geopolitical tensions, socio-political shifts, backing from the U.S. presidency, and growing corporate acceptance of Bitcoin.

Bitcoin Bulls Displayed Excessive Optimism Wagering on Prices Reaching $72,000 or Beyond

The $6.5 billion options expiry for Bitcoin on May 31 is mirroring previous patterns of bullish optimism. However, with bulls struggling to breach the $70,000 resistance in the past week, it's increasingly likely that these overly optimistic call options, particularly those placed at $72,000 or higher, will end up worthless. As the deadline draws near, Bitcoin bears may avoid significant losses.

Contrary to the belief of many Bitcoin-centric investors, the price of BTC is heavily influenced by external factors such as monetary policies, economic indicators, inflation rates, unemployment figures, and confidence in government bond issuance. While Bitcoin may occasionally correlate with the stock market and gold, investors often retreat to cash positions and short-term U.S. Treasury bonds during periods of market uncertainty.

The recent record-breaking performance of the Nasdaq Composite index, surpassing 17,000 points on May 28, suggests that investors are increasingly confident in the U.S. Federal Reserve's strategy for a soft landing, aiming to bring inflation back to its 2% target while maintaining favorable corporate earnings across most sectors. This positive environment bodes well for risk-on assets, including Bitcoin, as lower interest rates are anticipated.

The excessive bullish bets leading up to the Bitcoin monthly options expiry at 8:00 am UTC on May 31 are reminiscent of the 25% gains witnessed as BTC surged from $56,883 to $71,417 in the first 20 days of May. However, this rally proved unsustainable, particularly in the wake of the approval of a spot Ethereum exchange traded fund (ETF) in the U.S., which introduces competition for institutional investors' capital.

If BTC Trades Above $70,000 Bulls Stand to Profit by Approximately $270 Million

To accurately interpret the odds for each BTC expiry price level, it's crucial to analyze the open interest of both call (buy) and put (sell) options. Despite call options dominating with a 70% higher notional value, it's important to note that Deribit's $4.62 billion open interest may significantly decrease if BTC trades below $70,000 on May 31, as 99% of these options would become null. Similarly, put option investors would face disappointment if Bitcoin remains around $67,800 on the monthly expiry, as only 5% of the $1.7 billion contracts were placed at $68,000 or higher.

Deribit holds a commanding position in the options market, responsible for a 71% market share of Bitcoin's monthly open interest in May. However, it's valuable to examine aggregate data since investors' preferences vary across exchanges. Exchange is the second-largest player for May's BTC options expiry, with a total open interest of $745 million, followed by the exchange with $600 million.

If Bitcoin hovers near $67,800 on May 31, the aggregate open interest for call options will be $135 million, while put options open interest at $68,000 will amount to $145 million. This level indicates a fairly balanced scenario, but both bulls and bears have incentives to influence the price before expiry. For instance, a price of $65,900 would favor put options by $95 million, whereas an expiry at $70,000 or higher would provide a $270 million advantage for call options. With less than three days remaining until the monthly expiry, it's unlikely that bulls will manage to push Bitcoin's price above $70,000 given the absence of short-term catalysts. Therefore, the odds seem to favor a neutral outcome near $68,000.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.