Many Bitcoin (BTC) traders are hoping for a significant price correction followed by a recovery rather than enduring a prolonged period below $24,000. However, the price of BTC has been moving in the opposite direction since June 14, and its recent challenge is breaking above the $22,000 resistance level. Consequently, traders are being cautious with their bullish expectations until BTC manages to close above $24,000 for the day.
External events beyond the crypto market are influencing investors’ outlook on digital assets. On July 14, United States Treasury Secretary Janet Yellen expressed concern about the “unacceptably high” inflation and reiterated support for the Federal Reserve’s initiatives. Yellen acknowledged the potential risk of a recession when asked about the impact of rising interest rates on the economy.
On the same day, JPMorgan Chase reported a 28% decrease in profits compared to the previous year, mainly due to a $1.1 billion provision for credit losses stemming from a slight decline in its economic forecast despite stable revenues.
Bitcoin’s correlation with the S&P 500 remains remarkably strong, and investors are wary that any potential crisis in the global financial sector could lead to a retesting of the low of $17,600 from June 18.
The correlation metric ranges from -1 to 1, with -1 indicating opposite movements, 1 reflecting identical movements, and 0 showing no relationship between the assets. Currently, the S&P 500 and Bitcoin exhibit a 30-day correlation of 0.87, a consistent trend over the past four months.
Major bullish bets are centered around $21,000
Bitcoin’s inability to surpass $22,000 on July 8 surprised bullish investors as only 2% of call options for July 15 are placed below $20,000. Consequently, bears have a slight advantage in the $250 million weekly options expiry.
Looking at the 1.15 call-to-put ratio, more bullish bets are apparent, with $134 million in call open interest compared to $116 million in put options. However, if Bitcoin remains below $21,000, most bullish bets are likely to be rendered worthless.
If Bitcoin’s price lingers below $21,000 by 8:00 am UTC on July 15, only $25 million worth of call options will remain. This situation arises because having the right to purchase Bitcoin at $21,000 is meaningless if the price is below that level at the time of expiry.
Bears stand to gain a potential profit of $100 million
Based on the current price action, three likely scenarios indicate the number of available options contracts for call (bull) and put (bear) instruments, along with the theoretical profit favoring each side:
- Between $18,000 and $19,000: 10 calls vs. 5,200 puts. Bears are favored with a $100 million profit.
- Between $19,000 and $20,000: 200 calls vs. 3,400 puts. Bears have a $60 million advantage.
- Between $20,000 and $21,000: 1,300 calls vs. 1,700 puts. Bulls and bears are evenly balanced in this scenario.
While this estimate is a simplified view based on bullish and bearish trades, it overlooks more complex investment strategies.
Futures Markets Indicate Bears Have a Stronger Position
To secure a $100 million profit, Bitcoin bears need to drive the price below $19,000 by July 15. On the other hand, bulls would need to push the price above $20,000 to balance the equation in their favor.
Professional traders’ lack of enthusiasm in Bitcoin CME futures suggests that bulls are less inclined to drive prices higher in the near term. Therefore, the most likely scenario favors bears, requiring Bitcoin to trade below $21,000 by the July 15 options expiry.
Image Credit: Momentum Ronnarong / Shutterstock
