Bitcoin bulls risk losing $365 million upon Friday’s BTC options expiry
Bitcoin’s sharp jump from below $8,000 to above $17,000 in just two months has led investors and traders to pile into the cryptocurrency. Now with options expiring for a major futures contract at 3:16pm EST on Friday — meaning people will no longer be able to buy or sell Bitcoin by betting on its price — some are worried that losses could mount if prices fall back quickly after the option expiration date.
The “what is one bitcoin worth” is a question that many people have been asking. The answer to the question depends on what you are looking for, as it can be anywhere from $1,000 to $20,000.
Despite reaching an all-time high of $69,000 on November 10, Bitcoin’s (BTC) price movement has been bearish. Some suggest that the major trend is the 40-day-old declining channel, with $56,000 as its present resistance.
FTX’s BTC/USD rate. TradingView is the source of this information.
The bearishness comes after a report from the President’s Working Group on Financial Markets on Nov. 1 advised that stablecoin issuers in the United States should be subject to “proper regulatory monitoring,” comparable to banks and savings organizations.
The US Securities and Exchange Commission denied a proposal for a Bitcoin-backed exchange-traded fund (ETF) on November 12. The regulator justified the refusal by citing the inability of its participants to prevent fraud and market manipulation in Bitcoin trading.
The head of the United States Senate Committee on Banking, Housing, and Urban Affairs addressed notifications to numerous exchanges and stablecoin issuers on Nov. 23. The inquiries about consumer and investor protection in relation to stablecoins indicate that legislators are considering holding a hearing on the topic.
Bulls, on the other hand, may have a different perspective on the news, since stablecoins are not required for Bitcoin to function. Furthermore, there is nothing the US government can do to stop companies and developers from relocating beyond its borders.
For Friday’s expiration, Bitcoin options are predominantly positive.
Despite a 17 percent drop from the all-time high of $69,000 in the last 14 days, the Bitcoin call (buy) options dominate Friday’s expiration.
Bitcoin options open interest as of November 26. Bybt is the source.
On the surface, the $1.9 billion in call (buy) options seem to have a 113 percent lead over the $885 million in put (sell) options. The 2.13 call-to-put ratio, on the other hand, is misleading since the current collapse will likely wipe away 90% of the bullish bets.
If Bitcoin’s price stays below $58,000 at 8:00 a.m. UTC on Nov. 26, for example, just $150 million worth of call (purchase) options will be available at expiration. If Bitcoin is trading below $60,000 or $70,000, the right to acquire it at such prices is worthless.
Bears may make a $365 million profit if they sell for less than $56,000.
Based on the present price activity, the four most probable possibilities are shown below. For example, the data reveals how many contracts for bulls (calls) and bears (puts) will be available on Friday. The prospective profit is represented by the imbalance favoring each side:
720 calls vs. 7,490 puts below $56,000. The total outcome is a $365 million advantage for bear (put) options.
2,630 calls vs. 4,840 puts between $56,000 and $58,000. The overall outcome favors bear (put) instruments by $125 million.
3,600 calls vs. 3,850 puts between $58,000 and $60,000 The end outcome is even.
6,180 calls vs. 2,340 puts between $60,000 and $62,000. The total consequence is a $230 million change in favor of call (bull) instruments.
This rough estimate takes into account just call options in bullish wagers and put options in neutral-to-bearish transactions. A trader, on the other hand, may have sold a put option to earn a negative exposure to Bitcoin above a certain price. Regrettably, there is no simple method to calculate this impact.
To protect $56,000, the Bulls have quadruple the incentives.
Bulls must maintain the $56,000 barrier, as shown by the 40-day falling channel, to prevent additional momentum loss. It’s worth remembering that Bitcoin went from $41,500 to $56,000 in less than two weeks on Oct. 10. As a result, holding this level is critical in order to confirm the all-time high set on November 10th.
Furthermore, if bulls can drive Bitcoin’s price above $58,000, they will avoid a possible $365 million loss if bears get the upper hand because to regulatory winds. A modest 1.5 percent decrease from present levels of $56,800 might give bears the confidence to inflict considerably more agony.
The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision has some level of risk. When making a choice, you should do your own research.