The $ 3.2 billion bitcoin options expiration on Friday could spark a rally
Bitcoin (BTC) has been trading in a descending channel pattern since its all-time high of $ 67,000 on October 20, just a day after ProShares Bitcoin Strategic ETF (BITO) was launched on Nasdaq.
However, the bulls have enough momentum to peg Bitcoin price above $ 60,000 on October 29 after the $ 3.2 billion monthly options expire.
At the moment, investors have mixed feelings about the listing of the exchange-traded fund, even though the fund reached $ 1 billion in assets under management in 48 hours. Market expectations for these funds were too high or the 42% increase from October to October 19 was priced in beforehand.
Regulatory uncertainty in the United States was also a key factor in deterring some large institutional investors from entering the sector. At a US Senate committee hearing on October 26, Rostin Behnam, acting chairman of the Commodity Futures Trading Commission (CFTC) compared the government agency’s enforcement of the technical asset space number like a police officer on duty.
“The market transactions that are taking place right now are a large part of the risk that digital assets pose.”
Bulls are making a potential profit of $ 715 million
Ordinarily, those comments would have had little or no impact on a bull market, raising the question of whether or not the 13% correction from the all-time high on October 20th marks the end of the year, the end of a positive cycle.
The October 29 monthly expiration will be a test of strength for the bears as any prize over $ 58,000 would mean a profit of $ 385 million or more for the bulls.
At first glance, call (buy) instruments with a value of 1.94 billion dominate.
However, the call-to-put ratio of 1.56 is deceptive as the bears have been taken by surprise and most put options will be wiped out if Bitcoin price stays above $ 58,000 at 8 a.m. UTC on Oct 29.
Owning a put, i.e. the right to sell Bitcoin for $ 55,000, becomes worthless if the BTC price trades above that level.
Bulls comfortably over $ 58,000
68 percent of put options, which represent the right to sell Bitcoin at a preset price, were set at $ 58,000 or less.
Here are the four most likely scenarios considering current prices. In addition, the data shows how many contracts will be available for both buy (call) and sell (put) instruments on October 20th.
- From $ 52,000 to $ 55,000: 6,500 calls versus 6,530 bookings. The net result is a balance between the bulls and the bears.
- From $ 55,000 to $ 58,000: 9,510 calls versus 4,610 bookings. The net profit brings the cops $ 270 million.
- From $ 58,000 to $ 60,000: 9,900 calls versus 3,490 bookings. Net results continue to favor the $ 385 million bulls.
- Over $ 60,000: 13,870 calls versus 1,970 bookings. The net result will benefit the bulls of $ 715 million.
As shown above, the side that is prone to the imbalance represents a potential theoretical gain from decay.
This rough estimate looks at call (buy) options used in bullish and put (sell) strategies specifically for neutral to bearish trades. However, a trader may have sold a put, effectively reaching a positive level for Bitcoin above a certain price. Unfortunately, there is no easy way to gauge this effect.
Can the bears nail Bitcoin under $ 55,000?
Bears need a 6% correction from the current price of $ 58,500 to avoid a loss of $ 270 million. While it may not seem like much at first, traders also need to consider the bullish momentum created by ETF approval.
Less than 36 hours to the end of October 29th, the bulls will likely secure victory by holding Bitcoin above $ 59,000. For the bears, going below $ 55,000 may seem like a stretch, but it could be worth it.
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