Bitcoin Options Traders Anticipate Imminent Breakout Above $74K to New Record Prices

In their market update on Wednesday, digital asset hedge fund QCP reported robust buying of call options for June expiries at the desk, signaling that market participants are preparing for a definitive breach of the 74,000 mark as new all-time highs in the ongoing bullish trend.

As a researcher studying financial derivatives, I can explain that options represent agreements granting the holder the ability to acquire or dispose of an underlying asset at a specific price and time. If the asset’s value doesn’t meet the agreed-upon price by the expiration date, the option becomes worthless. When investing in calls, one is expressing a optimistic viewpoint regarding the asset’s future price growth, whereas put options reflect a pessimistic stance.

Joshua Lim, the co-founder of Arbelos Markets, a leading crypto derivatives principal trading firm, observed a significant surge in call buying on Tuesday. Approximately 1100 contracts were purchased for June 28 expiration call spreads within the $74,000 to $80,000 range, translating to around $80 million in notional demand.

In an options trading strategy called a call spread, you simultaneously purchase call options with a lower strike price and sell an equal number of call options with a higher strike price, both having the same expiration date. The objective is to earn profits when the underlying asset’s price experiences a modest increase.

Bitcoin has been holding steady for nearly three months after reaching an all-time peak of just under $74,000 in mid-March. Following a brief dip below $57,000 in early May, the cryptocurrency has made a gradual comeback and is currently being traded around $71,000, not far from its previous record highs.

As a crypto investor, I’m excited to hear Matrixport’s analysis in their recent post on Wednesday. They believe that bitcoin is gearing up for a price increase based on the significant inflows into U.S. spot Bitcoin ETFs and the surge in open interest in the futures market.

If the price of an asset climbs above $72,000, Matrixport warned, it could trigger a short squeeze. There are approximately $1.5 billion in leveraged futures contracts wagering on lower prices situated near this level. If these contracts are liquidated due to the price surge, it could intensify the upward trend.