As $445M options expire, bulls and bears clash over $34K Bitcoin price

The price of Bitcoin ( ETH0_) has fluctuated between $30,400 and 36,400 over the past 12 days. It has been difficult to determine the reason. Analysts have suggested that the Grayscale Bitcoin Trust's (GBTC) unlocking in mid July gave institutional investors a chance of offloading their funds. However, this is unlikely to be the primary reason.

Industry leaders suggest that the "crypto regulatory crackdown," which is taking place in the United States, is negatively impacting investors' sentiment. This view is particularly problematic given the recent ban in China of all crypto mining activities.

Last but not least, Aswath Damodaran (professor of finance at New York University’s Stern School of Business) has claimed that the cryptocurrency "failed miserably” as a currency.

Damodaran specifically mentions Bitcoin's limited use for microtransactions. El Salvador, however, is moving forward with a plan to democratize Lightning Network solution.

Bulls have a greater chance of winning the weekly expiry

The recent quarterly $3 billion options expiry on Friday saw bears win, but the winds could have shifted the balance in favor of bulls this time. The $34,000 level provided a $310-million advantage to neutral-to-bearish options, but this Friday, July 2, will offer a completely different set of options.

The initial picture shows a neutral structure with neutral-to positive call options open interest dominating by 8 percent according to the call-to–put ratio. The $230 million that is neutral-to-bullish open interest represents, of $445 million, gives the bulls a slight edge. A more detailed view offers a different perspective.

Only 18% have placed protective options at strikes of $33,000 and higher. If Bitcoin trades above this level on Friday at 8:00 UTC, then only $38 million worth neutral-to-bearish instruments can last.

For both sides, $34,000 is the critical level.

Bulls, on the other hand will try to defend $34,000, which would result in $45,000,000 in open interest in call (buy), options and call (buy).

Both sides have incentives for breaking this reasonable equilibrium at $34,000. Bulls' advantage increased to $7 million from $35,000 above, and $57 million above.

If Bitcoin trades below $33,000, bears are in control. The open interest in protective put options is $31 million more than that of neutral-to-bullish options.

It is difficult to predict which side will prevail on Friday's expiry. The bulls do have a fighting chance for the first time in more than four weeks.