$ 1.1 billion in Bitcoin options expire on Friday, but data points to a BTC price below $ 55,000

Bitcoin (BTC) bulls are still licking their wounds from the bloody December 4 correction, which caused the price to collapse from $ 57,000 to $ 42,000. This downward movement of 26.5% caused the liquidation of $ 850 million in long BTC futures contracts, but more importantly, it displaced the “index of fear and greed” to its lowest level since July 21.

Price of the Bitcoin / USD pair on FTX. Source: TradingView

It is somewhat strange to compare the two events, as the July 21 low below $ 30,000 would have wiped out all gains in 2021. Meanwhile, the low of $ 42,000 on Dec. 4 is still a 44% gain so far this year. We compare this to the S&P 500, which was up 21% in 2021 and the price of WTI oil, which has accumulated a 41% gain.

The bulls could focus on Bitcoin stocks held on exchanges, which continue to decline and are currently at the lowest level in 3 years. According to data from CryptoQuant, there are now less than 2.27 million BTC deposited on exchanges and there are fewer coins available for trading signals that investors are unwilling to sell in the short term. This is a dynamic that many investors consider optimistic.

Even with the apparent balance between call (buy) and put (sell) options at the $ 1.1 billion expiration on Friday, bears are better positioned after Bitcoin stabilized slightly above $ 50,000.

Added open interest of Bitcoin options for October 10. Source: CoinGlass

A broader view using the ratio of call and put options shows a modest 7% lead for Bitcoin bulls because $ 555 million call instruments have a higher open interest versus put options. of USD 520 million. However, the indicator at 1.07 is misleading because the 11.5% price drop over the past week caused most bullish bets to lose their value.

For instance, If the price of Bitcoin remains below $ 52,000 at 8:00 am UTC on December 10, only $ 50 million of those call options will be in play. That effect occurs because there is no value in the right to buy Bitcoin at $ 55,000 if it trades below that price.

The numbers suggest that the bulls are poised for a major loss.

Below are the three most likely scenarios based on the current price action. The number of option contracts available on December 10 for bullish (call) and bearish (put) instruments vary depending on the expiration price of BTC. The imbalance that favors each side constitutes the theoretical benefit:

  • Between $ 47,000 and $ 50,000: 400 call options vs. 6,600 put options. The net result is USD 300 million in favor of the sale instruments (bearish).
  • Between $ 50,000 and $ 54,000: 1,700 call options vs. 4,700 put options. The net result is USD 160 million in favor of the sale instruments (bearish).
  • Between $ 47,000 and $ 50,000: 2,400 call options vs. 6,600 put options. The net result is USD 300 million in favor of the sale instruments (bearish).

This gross estimate considers the call options that are used in bullish bets and the put options that are exclusively found in neutral to bearish operations. Still, this oversimplification ignores more complex investment strategies.

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

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

Bitcoin bears need a smooth push below $ 50,000 to make a $ 300 million profit. On the other hand, the bulls would need a 7.2% price recovery from the current $ 50,500 to cut their loss in half.

Considering the liquidation of $ 2 billion of leveraged long positions on Dec. 4, the bulls are likely trying to stay afloat and unwilling to add more risk at this point. It would be unnecessarily ineffective for optimistic investors to waste their efforts trying to salvage this short-term loss.

So in this case, the bears appear ready to hold the upper hand on the expiration of these weekly options.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Every investment and business move involves risk, you should do your own research when making a decision.

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Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Phone : +1 281-333-2229

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