Arthur Hayes, co-founder and former CEO of cryptocurrency derivatives exchange BitMEX, has bought Bitcoin $35K strike puts, expecting a dump below $40K amid an observable CME Gap.
Hayes continues to express his bearish outlook on Bitcoin’s price in the near future. Notably, the put options he recently purchased will pay off if
$BTC falls below $35,000 by March 29, 2024.
Hayes stressed that he believes Bitcoin will drop below the pivotal $40,000 threshold. The former BitMEX CEO said he expects the downtrend to last until the end of January 2024, as the U.S. Treasury quarterly refunding announcement is scheduled for Jan. 31.
The Treasury’s quarterly refunding announcement outlines its borrowing and debt management policy for the upcoming quarter, including details of Treasury securities auctions to finance government spending. Investors monitor the announcements due to its macro effects.
Citing trade data, Colin Wu, a well-known blockchain reporter, revealed that Hayes may have spent 5 BTC to purchase the $35K put options. Data from a snapshot suggests that he purchased each share for 0.025 BTC, with the 5 BTC spent procuring 200 puts at a cost of $203K.
A put option is a financial agreement that grants the holder the right, without imposing an obligation, to sell a designated asset at a prearranged price within a particular timeframe.
In this case, Hayes has the right to sell Bitcoin at $35,000, even if the market price is lower, by March 29, 2024. What this entails is that he will profit from the difference between the market price and the strike price, without the cost of the option.
Bitcoin CME Gap Below $40,300
Amid Hayes’ bearish bet, data confirms that Bitcoin currently faces a CME Gap that might result in a further drop in the asset’s price to get filled. Mister Crypto, a prominent crypto trader and analyst, called attention to this CME Gap in a post on X today.
A CME gap is a phenomenon that occurs when the price of Bitcoin on the Chicago Mercantile Exchange (CME), one of the largest regulated futures markets, differs from the price on other platforms.
This happens because the CME Bitcoin futures market closes on weekends and holidays, while the Bitcoin market is open 24/7.
As a result, when the CME market reopens, there may be a gap between the closing price of the previous session and the opening price of the new session.
The Bitcoin chart reveals that the CME Gap in question was created in the first weekend of December 2023. According to Mister Crypto, this gap is very close to being filled.
Notably, the gap ranges from $40,300 to $39,700. Bitcoin currently trades at $41,055, slightly above the gap.
Most traders believe the CME gaps tend to get filled sooner or later, as the market seeks to eliminate the price discrepancy. This implies that the Bitcoin price will have to drop to the lower end of the gap, or even below it, to fill the gap.
At the $41,055 price, Bitcoin still holds above the pivotal $40,000 support. Bitcoin has witnessed an increase in open interest (OI), which recently surged to $17.53 billion.
Most shorts in the market are betting on a BTC drop below the $40,000 price. Amid the increase in positions, Bitcoin has seen a 130% rise in derivatives volume to $35 billion.
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