Will Bitcoin fall below $70K after $2.2B options expiry?

    2024.06.07 | exchangesranking | 10onlookers

    Bitcoin could fall below the $70,000 psychological mark on June 7, with over $2.2 billion worth of cryptocurrency futures options set to expire.

    Of the total $2.2 billion, $1.22 billion of Bitcoin futures options are set to expire on Friday, signaling a “max pain point” of $69,500 for Bitcoin’s (BTC) price.

    The BTC futures options are set to expire with a put-to-call ratio of 0.66 on June 7, at 8:00 am UTC, according to a June 6 X post by Deribit Exchange.

    BTC Options: Open interest by strike price. Source: Deribit

    Periods close to the expiration of options are often characterized by increased price volatility in the crypto markets. While the max pain point indicates the price at which most options contracts would expire worthless, it’s not a guarantee that the underlying asset will fall to that price.

    Bitcoin’s price rose 0.3% in the 24 hours leading up to 10:50 am UTC to trade at $70,950. The world’s first cryptocurrency is up 4.6% on the weekly chart, according to CoinMarketCap.

    BTC/USDT, 1-day chart. Source: CoinMarketCap

    Related: 63 US banks on the brink of insolvency: Why Bitcoin’s next target is $100K

    Lower Bitcoin open interest can reduce options expiry impact: Bitfinex

    Bitcoin’s open interest (OI) saw a significant decline from its peak in November 2023, which will significantly diminish the effect of the options expiry, according to Bitfinex analysts, who told Cointelegraph:

    “We are currently 42.5% lower in terms of options OI relative to the peak in November, and hence, the impact that options expiries have on the larger market can be estimated to be lower than in the past.”

    Since the max pain price is becoming a widely understood indicator, it has less of an effect on Bitcoin’s price, added the Bitfinex analysts:

    “As an asset class matures, there are multiple tiered strategies where a trader can use options as a hedge against their futures or spot position so the max pain price reflected based purely off of options data does not reflect the ‘true’ max pain price.”

    Related: Robinhood to buy Bitstamp crypto exchange to enable institutional trading in US

    Bitcoin ETF inflows could help BTC remain above $70k

    Institutional inflows from the United States spot Bitcoin exchange-traded funds (ETFs) could help BTC remain above the key $70,000 price mark.

    ETF inflows could absorb significant selling pressure from Friday’s option expiry, but traders should still expect potential volatility, according to Bitfinex:

    “There has been $1.3B in inflows over the past two days, and the exchange leverage ratio has increased to monthly highs (implying there are a lot of leveraged positions entering the market). These are usually signs of a local top in markets, which might not be the case now but certainly warrants some caution against downside.”

    The U.S. Bitcoin ETFs saw collective inflows of $488.1 million on June 5. The ETFs recorded their second-best inflow day of $886.6 million on June 4.

    By Feb. 15, Bitcoin ETFs accounted for about 75% of new investment in the world’s largest cryptocurrency as it surpassed the $50,000 mark.

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