Bullish Bitcoin options dominate at $6.5 billion May expiration.

Bitcoin (BTC) investors are typically bullish, and despite several failed attempts to sustain prices above $71,000, derivatives bets on $80,000 and $90,000 continue to abound. This behavior is driven by expectations of highly-volatile events such as geopolitical tensions, socio-political changes, US presidential endorsements and corporate adoption of Bitcoin.

Bitcoin Bulls Are Overly Bullish Betting on $72,000 or More

Bitcoin's $6.5 billion in options expiring on May 31 is no different. However, as the bulls failed to break the $70,000 resistance last week, perhaps these overly optimistic call options will be worthless. To illustrate, 91% of these instruments are sitting at $72,000 or higher, which means bulls will be counted on for a sustained rally before May 31st. As the deadline approaches, Bitcoin bears are more likely to avoid heavy losses.

Contrary to what many Bitcoin-only investors believe, the value of BTC is influenced by external factors such as monetary policies, economic and inflation trends, unemployment and confidence in the government's ability to successfully issue bonds. Regardless of how bitcoin is currently correlated with the stock market and gold, investors typically hold cash positions and short-term U.S. Treasury bonds when market panic sets in.

The Nasdaq Composite Index's break above 17,000 points on May 28 shows that investors are more confident in the US Federal Reserve's plan for a soft landing. This plan aims for inflation to return to the 2% target, while corporate income remains comfortable for most sectors. This scenario creates a positive outlook for risk assets, including Bitcoin, as reduced interest rates are expected.

Overly optimistic bets for Bitcoin monthly options will end on May 31 at 8:00 p.m. However, this rally proved unsustainable, especially after the approval of an Ethereum exchange-traded fund (ETF) in the United States, creating competition for institutional investors.

General Data predicts $270 million profit for bulls if BTC sells above $70,000

It is important to analyze the open interest of calls (buy) and put (sell) instruments to interpret the odds set for each BTC expiration price level.

Although call options have a 70% higher notional value, Deribit's $4.62 billion in open interest is likely to be much lower because 99% of these instruments will be worthless if BTC trades below $70,000 on May 31st. With only 5% of the $1.7 billion contracts settled at $68,000 or more, bitcoin will remain at $67,800 at the end of the month.

Derbit is the absolute leader in the options market, holding a 71% market share of Bitcoin monthly open interest in May. However, since the profile of investors varies between exchanges, it is worth analyzing the aggregated data. The Chicago Mercantile Exchange (CME) was the second largest player in May BTC options expiration with a total of $745 million in open interest, followed by the OKX exchange at $600 million. Binance had a total of $315 million in open interest, and Baybit reached $160 million.

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If Bitcoin stays near $67,800 on May 31, total open interest for call options will be $135 million, while open interest for put options will be $145 million at $68,000. Essentially, such a level is balanced, but both bulls and bears have incentives to influence the price before expiration. For example, a price of $65,900 would favor put options at $95 million, and an expiration date of $70,000 or more would yield $270 million in leverage for call options.

With the monthly expiration less than three days away, it would be surprising if bulls could push bitcoin above $70,000 in the absence of short-term indicators. Therefore, the probability supports a neutral result near $68,000.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.