Twenty-three agonizing days have passed since Bitcoin 

BTC

$17,197

 last closed above $32,000 and the 10% rally that took place on May 29 and 30 is currently evaporating as BTC price retraces toward $30,000. The move back to $30,000 simply confirms the strong correlation to traditional assets and in the same period, the S&P 500 also retreated 0.6%.

Weaker corporate profits could pressure the stock market due to rising inflation and the upcoming U.S. Federal Reserve interest rate hikes, according to Citi strategist Jamie Fahy. As reported by Yahoo! Finance, Citi’s research note to clients stated:

“Essentially, despite concerns regarding recession, earnings per share expectations for 2022/2023 have barely changed.”

In short, the investment bank is expecting worsening macroeconomic conditions to reduce corporate profits, and in turn, cause investors to reprice the stock market lower.

According to Jeremy Grantham, co-founder and chief investment strategist of GMO, “We should be in some sort of recession fairly quickly, and profit margins from a real peak have a long way that they can decline.”

As the correlation to the S&P 500 remains incredibly high, Bitcoin investors fear that the potential stock market decline will inevitably lead to a retest of the $28,000 level.

The correlation metric ranges from a negative 1, meaning select markets move in opposite directions, to positive 1, which reflects a perfect and symmetrical movement. A disparity or a lack of relationship between the two assets would be represented by 0.

Currently, the S&P 500 and Bitcoin 30-day correlation stands at 0.88, which has been the norm for the past couple of months.

Bearish bets are mostly below $31,000

Bitcoin's recovery above $31,000 on May 30 took bears by surprise because only 20% of the put (sell) options for June 3 have been placed above such a price level.

Bitcoin bulls may have been fooled by the recent $32,000 resistance test and their bets for the $825 million options expiry go all the way to $50,000.

A broader view using the 0.77 call-to-put ratio shows more bearish bets because the put (sell) open interest stands at $465 million against the $360 million call (buy) options. Nevertheless, as Bitcoin currently stands above $31,000, most bearish bets will likely become worthless.

If Bitcoin's price remains above $31,000 at 8:00 am UTC on June 3, only $90 million worth of these put (sell) options will be available. This difference happens because there is no use in a right to sell Bitcoin at $31,000 if it trades above that level on expiry.

Bulls might pocket a $160 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on June 3 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

• Between $29,000 and $30,000: 1,100 calls vs. 5,100 puts. The net result favors bears by $115 million.
• Between $30,000 and $32,000: 4,400 calls vs. 4,000 puts. The net result is balanced between call (buy) and put (sell) instruments.
• Between $32,000 and $33,000: 6,600 calls vs. 1,600 puts. The net result favors bulls to $160 million.
• Between $33,000 and $34,000: 7,600 calls vs. 800 puts. Bulls extend their gains to $225 million.

This crude estimate considers the call options used in bullish bets, and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

Bears have less margin required to suppress Bitcoin price

Bitcoin bears need to pressure the price below $30,000 on June 3 to secure a $115 million profit. On the other hand, the bulls' best case scenario requires a push above $33,000 to increase their gains to $225 million.

However, Bitcoin bears had $289 million leverage short positions liquidated on May 29, according to data from Coinglass. Consequently, they have less margin required to push the price lower in the short term.

With this said, the most probable scenario is a draw, causing Bitcoin price to range near $31,000 ahead of the June 3 options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.