Bitcoin Bears Need BTC Price To Go Below $27K Before Friday’s $900M Options Expiration

The $900 million Bitcoin (BTC) weekly options expiring on May 12 could play a decisive role in determining whether the price will fall below $27,000.

Bitcoin price declined again to $30,000

BTC bears will try to take advantage of macroeconomic headwinds, Silk Road coins’ FUD, and uncertainty caused by Bitcoin’s transaction fee spike to pull Bitcoin’s price down over the next few days.

The BTC/USD pair broke above $29,800 on May 6, but the tide turned quickly as resistance proved stronger than expected.

The subsequent 8.2% two-day correction tested $27,400 support, favoring the thesis of sideways trading as investors evaluate the economic crisis dynamics and its potential impact on cryptocurrencies.

Meanwhile, Berkshire Hathaway owner and billionaire investor Warren Buffett is no longer optimistic about the growth of the US economy. Such a pessimistic scenario for the global economy could explain why some Bitcoin traders decided to reduce their exposure in the last week, greatly reducing the chances of breaking $30,000.

Bitcoin options: bulls were overly bullish

The open interest for the options expiration on May 12 is $900 million, but the actual number will be lower since the bears expected price levels below $28,000.

These traders became overly bullish after Bitcoin’s price rose 11.2% between April 9 and April 14, testing the $31,000 resistance.

The call-to-put ratio of 1.65 reflects the imbalance between $560 million in call (buy) open interest and $340 million in put options.

However, if Bitcoin’s price remains near $27,500 at 08:00 UTC on May 12, only $11 million of these call (call) options will be available. This difference occurs because the right to buy Bitcoin at $28,000 or $29,000 is useless if BTC trades below that level at expiration.

Bitcoin bulls aim for $28,000 to balance weight

Below are the four most likely scenarios based on current price action. The number of option contracts available on 12 May for buy (bull) and put (bear) instruments varies, depending on the expiry price.

The imbalance favoring each side constitutes the theoretical profit:

• Between $25,000 and $27,000: 100 calls vs. 9,900 calls. Has total control and earns $230 million.
• Between $27,000 and $28,000: 400 calls vs. 5000 calls. The net result favors the put (sell) instruments by $120 million.
• Between $28,000 and $29,000: 1500 calls vs. 2100 putts. The result is balanced between put and call options.
• Between $29,000 and $30,000: 3300 calls vs. 800 putts. The net result favors the call (bull) instruments by $70 million.

This rough estimate considers the call options used in bullish plays and the put options exclusively in neutral-to-bearish trades. Yet this oversimplification ignores more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price. Unfortunately, there is no easy way to calculate this effect.

Finally, after it became clear that the Bitcoin network was working as designed, the selling pressure dissipated, causing Bitcoin’s price to stabilize around $27,500. Still, traders should be cautious as the bears are still in a better position for the expiration of Friday’s weekly options, and favor negative price movements.

Related: PayPal’s crypto holdings surged 56% in Q1 2023 to nearly $1 billion

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.