Meta/crypto

$ 1.1 billion worth of bitcoin options expire Friday, but data suggests BTC price below $ 55,000

Bitcoin (BTC) Cops are still licking their wounds from the bloody December 4th correction the Price collapse of $ 57,000 up to $ 42,000. This 26.5% downward movement resulted in the liquidation of long BTC futures contracts amounting to 850 million “Fear and Greed Index”“To its lowest level since July 21st.

Bitcoin / USD price at FTX. Source: TradingView

It’s kind of weird to compare the two events, as the July 21 low below $ 30,000 would have wiped out all profits in 2021. Meanwhile, the low of $ 42,000 on December 4 is still 44% year-to-date. Compare that to the S&P 500, which is up 21% in 2021, and WTI oil price, which is up 41%.

You could focus on cops the Bitcoin reserves held on exchangeswhich continues to decline and is currently at its lowest level in 3 years. According to data from CryptoQuant, there are now less than 2.27 million BTC on exchanges and fewer coins are available for trading signals that investors do not want to sell in the short term. This is a dynamic that many investors consider bullish.

Despite the apparent balance between call (buy) and put (sell) options on Friday’s $ 1.1 billion expiry, bears are better positioned after Bitcoin stabilized just above $ 50,000.

Bitcoin options aggregate open interest for October 10th. Source: CoinGlass

A broader view using the call-to-put ratio reveals a modest 7% benefit for bitcoin bulls as the $ 555 million call (buy) instruments have a greater open interest than the put options (Put options) of $ 520 million. The 1.07 indicator is misleading, however, as the 11.5% drop in prices last week resulted in most bullish bets becoming worthless.

For example, if the price of Bitcoin stays below $ 52,000 at 8:00 a.m. UTC on December 10th, only those call (buy) options worth $ 50 million will be available. This effect occurs because the right to buy Bitcoin at $ 55,000 has no value if it trades below that price.

The numbers suggest the bulls are poised for a big loss

Below are the three most likely scenarios based on current price developments. The number of options contracts available on December 10 for bull (call) and bear (put) instruments will vary depending on the BTC expiry price. The imbalance favored by each side represents the theoretical gain:

  • Between $ 47,000 and $ 50,000: 400 calls vs. 6,600 puts. Net income is $ 300 million with the put (bear) instruments preferred.
  • Between $ 50,000 and $ 54,000: 1,700 calls vs. 4,700 puts. Net income is $ 160 million with the put (bear) instruments preferred.
  • Over $ 54,000: 2,400 calls vs. 2,900 puts. The net result favors the put (bear) options by $ 30 million.

This rough estimate takes into account the call options used in bullish bets and the put options used exclusively in neutral to bearish trades. However, this simplification ignores more complex investment strategies.

For example, a trader could have sold a call option effectively taking negative exposure to Bitcoin above a certain price. But unfortunately there is no easy way to gauge this effect.

Bears will do their best to keep BTC below $ 50,000

Bitcoin bears need a gentle push below $ 50,000 to make a profit of $ 300 million. On the flip side, the bulls would need a 7.2% rally from the current $ 50,500 to cut their loss in half.

With $ 2 billion of leverage long positions liquidated on December 4th, the bulls will likely try to stay afloat and will not be ready to take any more risk at this point. It would be unnecessarily ineffective for bullish investors to waste their efforts to rescue this short-term loss.

In this case, the bears seem to have the upper hand in this weekly option expiration.

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

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