New Bitcoin price spike turns profits into bulls of $ 1.2 billion BTC options expired on Friday
Every time Bitcoin (BTC) all-time highs are made, exaggerated expectations follow. It was no different this time as the price quickly hit $ 69,000 in the early hours of November 9th.
Bitcoin 8h, we received the historical correction on November 9th, which seems to be very small for the time being. Of course, I expect a bigger correction after we hit the 84,000 zone and then a boom.$ BTC #Crypto #Bitcoin pic.twitter.com/cfbBkOIFEK
– Miles J Creative (@JohalMiles) November 9, 2021
Words are just words so there is nothing to lose if you go up or down too much, but in the options market you have to pay a premium for these bets. For example, on November 10th, a Bitcoin call (call option) for $ 100,000 was trading at 0.022 BTC or $ 1,460 on December 31st. For this privilege, the investor pays an upfront fee, also known as a premium.
Analysts and experts quickly set their $ 100,000 target after Bitcoin hit its highest monthly close ever. However, history has shown that short-term price estimates rarely work, and it doesn’t matter whether you are an anonymous Twitter personality or a competent multi-million dollar crypto fund manager.
Bitcoin price estimates are often very different
Although Tim Draper is a widely successful venture capitalist, the price prediction of $ 250,000 for 2020 is down 88%. Even prominent bank analysts can make mistakes, as did Citibank FX Wire’s November 2020 “Market Comment”, in which they cited a potential high of $ 318,000 in 2021. Still, 50 days before the end of the year, maybe some of them? Prophecies come true, but most are still no better than random numbers.
The bears may have regulatory hurdles in their sights, such as Singapore, which has become the last region to ban crypto derivatives exchange services. Huobi Global announced on Tuesday that it would close the accounts of all Singapore-based users by the end of March 2022.
An initial analysis based on the open preference of call (buy) and put (sell) instruments shows an equilibrium situation for the expiration of $ 1.3 billion options in November.
At first glance, $ 630 million call (buy) options dominate weekly expiration times of just 12% compared to $ 565 million put instruments (sell).
The 1.12 bet is a scam, however, as the recent rally is likely to nullify most of the bearish bets. For example, if Bitcoin price is still above $ 66,000 at 8:00 a.m. UTC on November 12, almost every put (sell) instrument will become worthless. The right to sell Bitcoin for $ 58,000 or $ 62,000 has no value if it trades above that price.
Bulls can aim for a profit of $ 410 million at $ 70,000
Here are the four most likely scenarios for the November 12 deadline: An imbalance in favor of either party represents a theoretical gain. Contracts:
- From $ 64,000 to $ 66,000: 2,440 calls versus 310 bookings. $ 135 million net income supporting cops.
- From $ 66,000 to $ 68,000: 3,430 calls versus 50 bookings. Net income is $ 225 million coping support.
- From $ 68,000 to $ 70,000: 44,070 calls versus 10 bookings. $ 305 million net income supporting cops.
- Over $ 70,000: 5,820 calls versus 0 bookings. The net result was complete dominance, with the bulls making $ 410 million.
This rough estimate assumes that calls are only used in bullish bets, while calls are placed in neutral to bearish trades. This simplification belies more complex investment strategies.
For example, a trader could have sold a put, effectively making a positive level for Bitcoin above a certain price. Unfortunately, there is no easy way to gauge this effect.
The bears’ best hopes were in vain
After a 30-day 19% rally, the bulls prevailed during the weekly run on November 12th. One factor that could be partly responsible for this step is the lack of impact of agents. The bill requires that all digital asset transactions greater than $ 10,000 be reported to the IRS.
Traders need to keep in mind that even bearish news has little or no effect on prices during bullish times. Additionally, the bears’ efforts are required to pressure the price and are often ineffective.
The bulls can capitalize on the current situation by pushing BTC above $ 70,000, which would result in an estimated profit of $ 105 million, bringing their total profit to $ 410 million.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement carries risks. You should do your own research when making a decision.