Interest rates paused, but Bitcoin options indicate potential price decline.

The price of Bitcoin has been stuck below $26,300 since June 10, resulting in a 14.8% decline over two months. Meanwhile, the Nasdaq tech stock market index has risen by 13.6% over the same period, suggesting that investors are not turning to cash or short-term debt as a safe haven. In reality, demand for United States government bonds has decreased in the last six weeks. The yield on two-year U.S. Treasurys has risen from 3.80% on May 4 to 4.68% on June 14. Lower demand for debt instruments increases payouts, resulting in a higher yield. Investors tend to demand a higher yield when trading bonds if they believe that inflation will continue to be above target. The U.S. Treasury is expected to issue more than $850 billion in new bills between June and September, which is likely to result in higher borrowing costs for families and businesses. Despite this, investors have been flocking to tech companies while avoiding Bitcoin, as evidenced by the past two months’ performance.

According to CoinShares’ latest “Digital Asset Fund Flows Report,” the sector’s investment product outflows amounted to $88 million in the week ending June 10. The eight-week cumulative outflows for Bitcoin reached $254 million, representing approximately 1.2% of the total assets under management. Analysts at CoinShares attribute this trend to monetary policy considerations, as interest rate hikes show no signs of slowing down, causing investors to remain cautious. Bitcoin has been attempting to recapture the $27,500 support for the past two weeks, but the upcoming $600 million weekly options expiry on June 16 may make this more difficult.

It should be noted that the actual open interest for the options expiry will be lower, as bulls concentrated their bets above $27,000. These traders may have become excessively optimistic after Bitcoin’s price rose 8% on June 6, erasing the losses that had driven BTC down to $25,400. The 0.73 put-to-call ratio reflects the imbalance between the $350 million in call (buy) open interest and the $250 million in put (sell) options. However, if Bitcoin’s price remains near $26,000 at 8:00 am UTC on June 16, only $27 million worth of these call (buy) options will be available. This is because the right to buy Bitcoin at $27,000 or $28,000 is useless if BTC trades below that level on expiry.

Based on the current price action, below are the three most likely scenarios. The number of options contracts available on June 16 for call (bull) and put (bear) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

– Between $24,000 and $25,000: 0 calls vs. 6,100 puts. Bears are in total control, profiting $145 million.
– Between $25,000 and $26,500: 1,000 calls vs. 4,400 puts. The net result favors the put (sell) instruments by $100 million.
– Between $26,500 and $27,000: 2,200 calls vs. 2,800 puts. The net result is balanced between call and put instruments.

This paragraph explains that the estimate being made only takes into account call options used in optimistic trades, and put options used in trades where the investor is neutral or pessimistic. This estimation is oversimplified and does not consider more complicated investment strategies.

However, traders should be careful because currently the market favors negative price movements, making bears (investors who are pessimistic about the market) more likely to profit from Friday’s weekly options expiry. Therefore, a significant drop below $25,000 should not be ruled out.

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