Wednesday, May 25, 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 triggered $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 value at FTX. Supply: TradingView

It’s by some means unusual to check each occasions, because the July 21 sub-$30,000 low would have erased all the positive factors in 2021. In the meantime, the $42,000 low from Dec. 4 continues to be a 44% acquire year-to-date. Examine this towards the S&P 500, which is up 21% in 2021, and the WTI oil value, which has accrued a 41% acquire.

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Bulls is likely to be targeted on the Bitcoin reserves held at exchanges, which continues to descend and presently sits on the lowest stage in three years. In line with information from CryptoQuant, there are actually lower than 2.27 million BTC deposited at exchanges and having fewer cash accessible for buying and selling alerts that buyers are unwilling to promote within the quick time period. It is a dynamic that many buyers think about 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 reveals 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% value drop over the previous week triggered most bullish bets to turn into nugatory.

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

The numbers counsel that bulls are set for a significant loss

Under are the three almost definitely situations primarily based on the present value motion. The variety of possibility contracts accessible on Dec. 10 for bulls (name) and bear (put) devices fluctuate relying on the expiry BTC value. The imbalance favoring either side constitutes the theoretical revenue:

  • Between $47,000 and $50,000: 400 calls vs. 6,600 places. The online result’s $300 million favoring the put (bear) devices.
  • Between $50,000 and $54,000: 1,700 calls vs. 4,700 places. The online result’s $160 million favoring the put (bear) devices.
  • Above $54,000: 2,400 calls vs. 2,900 places. The online 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 completely in neutral-to-bearish trades. Even so, this oversimplification disregards extra advanced funding methods.

As an example, a dealer might have offered a name possibility, successfully gaining a destructive publicity to Bitcoin above a selected value. However, sadly, there’s no straightforward option to estimate this impact.

Bears will do their greatest 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% value 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 danger 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 mirror the views of Cointelegraph. Each funding and buying and selling transfer entails danger. You must conduct your individual analysis when making a call.