Bitcoin’s price has been pegged below $26,300 since June 10, reflecting a 14.8% correction in two months. Meanwhile, the Nasdaq Tech Stock Market Index rose 13.6% over the same period, suggesting investors aren’t exactly fleeing to the safe haven of cash and short-term debt. In fact, demand for U.S. government bonds has fallen for the past six weeks.
For example, the two-year Treasury yield rose from 3.80% on May 4th to 4.68% on June 14th. When demand for bonds declines, payments rise, and yields rise as a result. If investors believe inflation will remain above target, participants tend to demand higher yields when trading bonds.
The U.S. Treasury Department plans to issue more than $850 billion in new notes between June and September. Markets expect higher borrowing costs for households and businesses as additional bond issuances tend to yield higher yields. Still, it doesn’t explain why investors are flocking to tech companies while avoiding Bitcoin (BTC), as the past two months’ performance shows.
Virtual currency fund outflow for 8 consecutive weeks
According to CoinShares’ latest “Digital Asset Fund Flow Report,” investment product outflows in the sector reached $88 million in the week ending June 10. The massive outflow has added to an eight-week streak of outflows, which now total $417 million.
The cumulative outflow of bitcoin in eight weeks reached $254 million, equivalent to about 1.2% of total assets under management. Analysts at CoinShares attribute the trend to monetary policy considerations, as interest rate rises show no signs of slowing and investors remain wary.
Bitcoin has been trying to regain support at $27,500 for the past two weeks, but that may be harder than expected given the scheduled expiration of $600 million in weekly options on June 16.
Bulls Dazzled as Bitcoin Temporarily Breaks Above $27,000
It is worth noting that the actual open interest at option expiry will be lower as the bulls concentrated their bets above $27,000. These traders may have become overly optimistic after bitcoin’s price jumped 8% on June 6, wiping out the losses that drove BTC down to $25,400.
A put-to-call ratio of 0.73 reflects an imbalance between $350 million of call (buy) open interest and $250 million of put (sell) options.
However, if the price of Bitcoin remains close to $26,000 as of 8:00 a.m. UTC on June 16, these call (buy) options will only be available for $27 million. This difference occurs because the right to buy Bitcoin at $27,000 or $28,000 is useless if BTC trades below that level on expiration.
Related: Bitcoin Is “Much Bigger” Than Binance And Coinbase, Says Jan3 CEO: BTC Prague 2023
Bulls Need Bitcoin Price to $26,500 to Avoid $100 Million Loss
Below are the three most likely scenarios based on current price movements. The number of option contracts available for call (bullish) and put (bearish) products on June 16 depends on the expiry price.
An imbalance in favor of each side constitutes a theoretical profit.
- Between $24,000 and $25,000: 0 calls versus 6,100 puts. The bears are in full control, with a profit of $145 million.
- Between $25,000 and $26,500: 1,000 calls versus 4,400 puts. The net result is a $100 million advantage in the put product.
- Between $26,500 and $27,000: 2,200 calls versus 2,800 puts. The final result is a balance between call and put instruments.
This rough estimate takes into account call options used in bullish bets and put options used in neutral versus bearish trades only. This oversimplification ignores more complex investment strategies.
Still, traders should be cautious as the bears are now in an advantageous position heading into Friday’s weekly options expiration and prefer negative price action. Therefore, a final significant correction below $25,000 should not be ignored.
This article is for general informational purposes and is not intended, nor should it be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views or opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Any investment or trading move involves risk and readers should conduct their own research before making any decision.
