Wednesday, June 29, 2022

$1.1B in Bitcoin options expire on Friday, but data points to a sub-$55K BTC price

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Bitcoin (BTC) bulls are nonetheless licking their wounds from the bloody Dec. 4 correction, which noticed the price collapse from $57,000 all the way in which to $42,000. This 26.5% draw back transfer precipitated $850 million in lengthy BTC futures contracts to be liquidated, however extra importantly, it shifted the “Fear and Greed index” to its lowest stage since July 21.

Bitcoin/USD worth at FTX. Supply: TradingView

It’s someway unusual to match each occasions, because the July 21 sub-$30,000 low would have erased your entire beneficial properties in 2021. In the meantime, the $42,000 low from Dec. 4 remains to be a 44% acquire year-to-date. Evaluate this towards the S&P 500, which is up 21% in 2021, and the WTI oil worth, which has accrued a 41% acquire.

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Bulls is perhaps centered on the Bitcoin reserves held at exchanges, which continues to descend and at present sits on the lowest stage in three years. In response to knowledge from CryptoQuant, there at the moment are lower than 2.27 million BTC deposited at exchanges and having fewer cash out there for buying and selling alerts that buyers are unwilling to promote within the quick time period. It is a dynamic that many buyers take into account to be bullish.

Even with the obvious steadiness between name (purchase) and put (promote) choices on Friday’s $1.1 billion expiry, bears are higher positioned after Bitcoin stabilized barely above $50,000.

Bitcoin choices combination open curiosity for Oct. 10. Supply: CoinGlass

A broader view utilizing the call-to-put ratio exhibits a modest 7% benefit to Bitcoin bulls as a result of the $555 million name (purchase) devices have a bigger open curiosity versus the $520 million put (promote) choices. Nevertheless, the 1.07 indicator is misleading as a result of the 11.5% worth drop over the previous week precipitated most bullish bets to develop into nugatory.

For instance, if Bitcoin’s worth stays under $52,000 at 8:00 am UTC on Dec. 10, solely $50 million price of these name (purchase) choices can be out there. That impact occurs as a result of there isn’t any worth in the precise to purchase Bitcoin at $55,000 whether it is buying and selling under such worth.

The numbers counsel that bulls are set for a serious loss

Beneath are the three most certainly situations based mostly on the present worth motion. The variety of possibility contracts out there on Dec. 10 for bulls (name) and bear (put) devices differ relying on the expiry BTC worth. The imbalance favoring both sides constitutes the theoretical revenue:

  • Between $47,000 and $50,000: 400 calls vs. 6,600 places. The web result’s $300 million favoring the put (bear) devices.
  • Between $50,000 and $54,000: 1,700 calls vs. 4,700 places. The web result’s $160 million favoring the put (bear) devices.
  • Above $54,000: 2,400 calls vs. 2,900 places. The web consequence favors the put (bear) choices by $30 million.

This crude estimate considers the decision choices being utilized in bullish bets and the put choices which are solely in neutral-to-bearish trades. Even so, this oversimplification disregards extra complicated funding methods.

As an example, a dealer might have bought a name possibility, successfully gaining a destructive publicity to Bitcoin above a particular worth. However, sadly, there’s no straightforward approach to estimate this impact.

Bears will do their finest to carry BTC under $50,000

Bitcoin bears want a delicate push to sub-$50,000 to attain a $300 million revenue. However, bulls would wish a 7.2% worth restoration from the present $50,500 to cut back their loss by half.

Contemplating the $2 billion liquidation of leverage lengthy positions on Dec. 4, bulls are probably attempting to remain afloat and can be unwilling so as to add extra threat proper now. It might be unnecessarily ineffective for bullish buyers to waste their efforts attempting to salvage this short-term loss.

So, on this occasion, bears look set to keep up the higher hand on this weekly choices expiry.

The views and opinions expressed listed here are solely these of the author and don’t essentially replicate the views of Cointelegraph. Each funding and buying and selling transfer includes threat. It is best to conduct your personal analysis when making a choice.