On June 4, a total of 15,530 Bitcoin (BTC) options expire, representing an open interest of $ 575 million. At the moment, the bulls are still badly affected by the 37% correction in BTC price at the end of May, which has resulted in the bulk of the call options being sunk.
Despite the drop in prices active supply of bitcoin hit a five month low as 45% of currencies hadn’t moved in the past 2 years. This indicator shows that investors who bought by Bull Run 2019 are not ready to sell at current prices.
The miners also avoid selling below $ 40,000 as their withdrawals recently hit a seven-month low from the historical average.
In the meantime, Technical analysts pointed to the 50-week exponential moving average as a strong support level near $ 34,000. Nevertheless, the price chart has formed a sideways trading pattern, which in a. culminates Wedge of enlargement and fracture known as “compression”, and indicates higher volatility towards the end of the week.
What is clear is that the market is currently divided and everyone is picking up different signals to guess the direction of the next trend move.
The bears could have dominated when the markets collapsed
While the bears could easily have mastered the expiration date this Friday, they seem to have gotten overconfident by primarily focusing on put options below $ 32,000.
The initial outlook is in favor of the bears as the ratio of long and short positions is 0.84, although this indicator rates all options equally. However, the right to purchase Bitcoin for $ 46,000 in less than 42 hours is currently worthless, which is why these call options trade below $ 20 each.
There is a similar effect for neutral to bearish put options at USD 28,000 and below.. Owners have no advantage in extending them for the next few weeks, as these contracts are also no longer worth much. Therefore, to better understand how traders are positioned for the June 4th option expiration, it is necessary to focus on the range of $ 32,000 to $ 42,000.
Neutral to bullish call options of up to $ 42,000 result in 3,080 Bitcoin contracts, which corresponds to an open interest of $ 114 million. On the flip side, put options up to $ 32,000 comprise 4,680 bitcoin contracts that are currently valued at $ 173 million.
As expected, the $ 60 million difference in favor of the bears is not enough to create a discrepancy. This situation was caused by overly bearish bets that didn’t pay off, which could result in the first forfeit of the matched options in three weeks.
Market makers are sloping down
The 25% slope of the options delta provides reliable and instant analysis of “fear and greed” in the market. This indicator compares similar call and put options side by side and becomes positive if the premium of neutral to bearish put options is higher than that of call options with a similar risk. This situation is generally considered a “scary” scenario, although it is common after lengthy rallies.
On the other hand, an indicator with a negative value leads to higher protection costs and indicates a bullish sentiment.
Since May 17th the indicator has moved into the “fear” area, peaking at 20% on numerous occasions, indicating a lack of interest in protective put options.
There is no question that the bulls are cautious, but historically these are the best opportunities to buy the dip.
At least for the option expiration on June 4th, the bears no longer dominate trading. The expiration dates for Huobi, OKEx and Deribit are on June 4th at 8:00 a.m. UTC.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risks, you will need to do your own research when making a decision.