$5.5 billion worth of Bitcoin (BTC) options expire in the early morning hours of July 26. This month’s expiration is particularly significant as the Bitcoin price has faced significant negative pressure from multiple sources: the Mt. Gox bankruptcy proceedings distribution, the German government’s sale of 50,000 BTC, and the sale of 14,000 BTC by the failed Genesis Trading company.
Significant selling pressure has caused most Bitcoin call options to become worthless.
On July 24, Mt. Gox assets sent 42,583 BTC to several addresses likely to be cryptocurrency exchanges. These funds have been held for over a decade since the Japanese-based exchange collapsed and are currently being distributed to creditors, leaving no remaining balance to distribute. Likewise, the German government sold off its last Bitcoin holdings on July 12.
Also, Genesis Trading, the OTC and trading desk of the now-defunct Digital Currency Group, transferred 14,000 BTC to Coinbase between June 12 and July 17, indicating a potential liquidation of the assets. Unlike other cases that appeared to have been depleted, the Genesis Trading address still holds 32,256 BTC, according to Arkham Intelligence data. A U.S. court ordered the company to repay investors a total of $2 billion.
On the positive side, Bitcoin spot exchange-traded funds (ETFs) have attracted a total of $2.84 billion in inflows since July 5, according to Farside Investors data. This aggressive selling pressure explains why Bitcoin price retested below $55,000 on July 8 and failed to break above the $68,000 resistance level on July 22.
This movement explains why most put (sell) options were sold below $60,000, while call (buy) options were targeting $70,000 or more. The put-call open interest is heavily in favor of call options, but not necessarily in favor of a neutral-bullish strategy.
If Bitcoin Price Falls Below $64,000, Put Options Are Favorable
Deribit is the absolute market leader for the July BTC options expiry, with $4 billion in open interest. The Chicago Mercantile Exchange (CME) is next with $800 million, followed by OKX with $400 million and Binance with $300 million. The combined July call and put BTC options total $5.5 billion.
If Bitcoin remains near $66,500 at 8:00 AM UTC on July 26, the right to buy BTC at $68,000 and $70,000 will not be exercised. Likewise, the put (sell) option below $66,000 will be invalidated. Therefore, the total open interest of $5.5 billion is misleading and requires in-depth analysis based on the expected price range.
The 0.62 put-call ratio represents an imbalance between $2.5 billion in open call interest and $1.5 billion in put options. However, if Bitcoin’s price remains below $67,000 at 8:00 AM UTC on July 26, only $560 million worth of these call options will be exercised.
Related: Kraken, Mt. Gox Bitcoin Distribution Completed, But Bondholders Won’t Sell BTC
Below are the four most likely scenarios for Deribit exchange based on the current price trend. Availability of call and put option contracts on July 26 depends on the settlement price.
- Between $62,000 and $64,000: 5,830 puts versus 2,780 calls. The net result is $190 million in favor of the put (sold) option.
- Between $64,000 and $66,000: 4,260 calls vs. 3,950 puts. The net result is a balance between the call and put options.
- Between $66,000 and $67,000: 6,270 calls vs. 2,300 puts. The net result is $260 million in favor of the call (buy) option.
- Between $67,000 and $68,000: 8,060 calls vs. 1,600 puts. The result is a $430 million advantage for the call (buy) option.
Essentially, Bitcoin bulls would need to hold $66,000 support before the July monthly expiration to potentially secure a $260 million advantage. It’s worth noting that this rough calculation doesn’t take into account more complex investment strategies.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.